Rich Dad’s Financial IQ Cultivation: Stock Fundamentals

Chapter 12 Issuance and Listing of Stocks (2)
(4) Factors of war.Mainly refers to military conflicts.Military conflicts are the result of the contradictions within a country or between countries, and between international interest groups that have developed to the extent that political means cannot be used to resolve them.Small military conflicts cause social and economic turbulence within a country or a region, and large ones disrupt the normal international order.It destroys the normal transaction of the securities market, which will inevitably lead to violent turmoil in the relevant securities market.For example, at the beginning of the Gulf War, the world's major stock markets all showed a downward trend, and as the war situation continued to change, the stock markets fluctuated sharply.

(5) Cultural and natural factors.As far as cultural factors are concerned, a country's cultural traditions often determine people's savings and investment psychology to a large extent, thereby affecting the pattern of capital inflows and outflows in the securities market, and then affecting the price of the securities market; the cultural quality of securities investors is It affects the securities market from the perspective of investment decision-making.Generally speaking, securities investors with high cultural quality are more rational when investing. If the overall cultural quality of securities investors is high, the stock market price will be relatively stable; on the contrary, if the overall cultural quality of securities investors is low, then Stock market prices are prone to sharp rises and falls.In terms of nature, if a natural disaster occurs, production and operation will be affected, which will lead to a decline in the price of related securities; on the contrary, if it enters the stage of restoration and reconstruction, due to a large increase in investment, the demand for related items will also increase significantly, resulting in a decline in the price of related securities. price rise.

([-]). Industrial and regional factors

Industrial and regional factors mainly refer to the influence of industrial development prospects and regional economic development on stock market prices.It is a mesoscopic factor between the macro and micro, so its influence on the stock market price is mainly structural.

In terms of industry, each industry will experience a development process from growth to decline, which is called the life cycle of the industry.The life cycle of an industry is usually divided into four stages, namely, the start-up period, the growth period, the stable period, and the recession period.Industries at different stages of development have great differences in operating conditions and development prospects, which will inevitably be reflected in securities prices.The prices of property securities that are booming show an upward trend, while the prices of property securities that are declining are gradually falling.

In terms of regions, due to differences in regional economic development, the convenience of regional external transportation and information communication, and the degree of investment activity in the region, the prices of securities belonging to each region will naturally vary, even for securities of the same industry. is also like this.Areas with rapid economic development, convenient transportation, and high degree of informatization have active investment and better expectations for securities investment; on the contrary, areas with slow economic development, inconvenient transportation, and blocked information have a general decline in securities prices.

([-]). Company factors
Firm factors, that is, the impact of a listed company's operations on the price of a security.Listed companies are the users of the funds raised by issuing securities and the implementers of the investment income from the use of funds, so their operating conditions have a great impact on the price of securities.And its operation and management level, technological development ability, competitive strength and position in the industry, financial status, etc. are all related to its operation status, thus affecting the stock market price from various aspects.Due to the clear boundaries of property rights, corporate factors generally only have a profound impact on the company's securities market price, which is a typical microcosmic factor.

([-]). Market factors
Market factors, that is, factors affecting various securities market operations that affect securities market prices.For example, behaviors such as bullish and bearish, short buying and short selling, chasing up and killing down, profit-making and unwinding or cutting meat, etc., there are also violations of laws and regulations such as position division, collusion, and round speculation in the irregular securities market Manipulation of securities market operations.Generally speaking, if the securities market has more long-term actions than short-term actions.Then the security price will rise; conversely, if the short-selling behavior has the upper hand, the security price will tend to fall.Since various securities market operations are mainly short-term behaviors, the influence of market factors on securities market prices has an obvious short-term nature.

The impact of economic factors on stock prices

There are many economic factors that affect the securities market, such as economic cycles, economic indicators, inflation, interest rates, exchange rates, foreign trade conditions, etc., which are comprehensively expressed as the economic situation.There is an obvious correlation between the economic situation and the trend of the stock market: when the economic situation is normal and stable, the stock price rises steadily; when the economic situation is good, the stock market is bullish; There is a possibility of wandering or falling.

([-]) Economic cycle

The operation of a market economy always goes through four stages of recovery, prosperity, recession, and depression, which are repeated and repeated.The business cycle has an important effect on the prices of securities, especially common stocks.When the economy tends to prosper, the scale of production expands, the social demand increases, the company's profits increase greatly, and the common stock income will increase significantly. People are optimistic about the stock market and buy stocks enthusiastically, and the stock price rises; Bankruptcy increased the risk of common stock investment, people sold stocks one after another, and stock prices fell again and again. Therefore, the stock market is known as the "barometer" of the economy.It reflects the country's future economic prospects, the actual economic situation, the honor and disgrace of various industries, and growth.

But generally speaking, the cycle of stock market changes is ahead of the economic cycle.Because investors in the stock market can respond to the future economic situation faster than companies engaged in production and operation activities, when the economy continues to decline to the end-the depression period, when all industries are depressed, and investors have stayed away from the stock market. Investors who are constantly collecting and analyzing the relevant economic situation and making reasonable judgments have been quietly absorbing stocks, and the stock price has risen slowly; when the economy gradually recovers, the stock price has actually risen to a certain level.With the general recognition of the people and the improvement of investors' own situation, the stock market has become increasingly active, and even large investors have taken the opportunity to bid up, so the stock market has hit new highs.At this time, knowledgeable people quietly sold stocks based on economic analysis, which changed the forces of supply and demand, and the stock price began to fall. When the economy entered a recession, the stock price had already fallen for a period of time.

In the first half of 1993, my country's economy was in an overheated state, and then began to gradually cool down, while the stock market peaked and fell back in early 1993, and has been in a bear market ever since; The decline ended in February, and it turned upwards, launching round after round of bull market.The Shanghai Composite Index rose from about 1998 points in February 1996 to about 2 points in May 1996, an increase of 2 points. At the end of June 520, the Shanghai Composite Index reached a record high of around 1997 points. Since 5, my country's economy has continued to maintain a relatively high growth rate, which has led to the stock market's rising trend for 1500 consecutive months. After the Shanghai Composite Index broke through 1000 points, it touched 1999 points, which fully shows that my country's economic cycle changes are important factors affecting the stock market. .

([-]) Gross National Product

In the long run, stock price fluctuations are directly proportional to changes in GNP.Gross national product is a comprehensive economic indicator, its decline indicates that the country's economy is in recession, and the operating profitability of most companies must also be poor. Of course, stock prices will fall; otherwise, they will rise.

Gross national product is a very comprehensive and most important indicator, reflecting the total value of all commodities and labor services produced by the national economy within a specific period of time (usually 1 year).A careful analysis of the changes in the gross national product and its various components can provide important information for investors to grasp the stock market.

If the real GNP continues to grow, the return on common stocks will be greatly improved; if the nominal GNP increases but the real value remains unchanged or even declines, it indicates that the economy has entered stagflation and it is not suitable to invest in common stocks.The specific manifestations are:

(1) Sustained, stable and high-speed GNP growth.Under such circumstances, aggregate social demand and aggregate supply develop in a coordinated manner, and the economic structure is gradually rationalized and balanced.Economic growth comes from demand stimulation and makes full use of idle or low-utilization resources, which shows a good momentum of economic development, and the securities market is on the rise.

(2) GNP growth under high inflation.When the economy is growing at a high rate of severe imbalance, aggregate demand is greater than aggregate supply, which manifests itself as a high inflation rate.At this time, the stock market will be stimulated.This is a symptom of changes in the economic form. The contradictions in the economy are prominent, business operations will face difficulties, and national real income will also decrease. Therefore, unbalanced economic growth will inevitably lead to a decline in the stock market.

(3) GNP decelerates under macro-control.When GNP shows unbalanced high-speed growth, the government may adopt macro-control measures to maintain stable economic growth; if the regulation goals are successfully achieved, but GNP does not experience negative growth or low growth, it shows that macro-control measures are very effective and economic contradictions are gradually resolved. The securities market has gradually stabilized and gradually increased.

(4) Turning GNP changes.If GNP shows negative growth for a certain period of time.When the negative growth rate gradually slows down and turns to a positive growth trend, the deteriorating economic environment will gradually improve, and the securities market will also turn from falling to rising.

GNP is divided into private consumption, private investment, net export and government expenditure, and their changes reflect changes in the development prospects of the corresponding industries and sectors of the entire economy, thus providing useful information for investors to invest.If the home computer is popular in the market, it can be predicted that the stock price of the company that produces the home computer will rise; and it is not difficult to see the key change of the national industrial policy from the structure of government expenditure.

([-]) Bank interest rate

From an investor's point of view, it is the most sensitive factor among all factors affecting stock prices.Bank deposits are generally risk-free and can be deposited and withdrawn freely.When the bank interest rate rises, investors will turn to risk-free bank deposits, sell stocks one after another, and the funds will flow into the bank, which will cause an imbalance between supply and demand in the stock market, thereby causing the price of the stock to fall; When it is low, the stock price will rise.

Specifically, in real life, interest rates mainly affect security prices in two ways:
(1) Changes in interest rates lead to changes in securities investment expectations, thereby driving changes in securities prices.On the one hand, the level of interest rates reflects the difficulty of capital allocation and the rise and fall of financing costs, resulting in changes in corporate profit margins and changes in stock prices.Interest rates rise, corporate borrowing costs increase, profit margins fall, and stock prices naturally fall, especially those companies with relatively high debt ratios and relying on bank loans for production and operation will have a more significant impact, and the corresponding stock prices will suffer even worse losses; At the same time, rising interest rates will increase the operating risks of companies operating in debt, and both corporate bond and stock prices will fall.On the other hand, the interest rate is one of the important policies of the country's macroeconomic regulation and control. Lowering the interest rate is a policy introduced by the country to stimulate the economy, so the expected return on securities will increase, and the stock price will rise; [-]. The measures taken by the overheating of the economy are aimed at slowing down the economic growth rate, the investment income will be reduced due to the economic environment, and the securities price will be low.

(2) The interest rate will also affect the supply and demand relationship in the securities market, thereby affecting the securities price. The increase in interest rates will increase the substitutability of bank deposits, corporate bonds and other financial assets in the same period, and increase the opportunity cost of bond and stock investment, reducing the For the demand for securities investment, part of the funds are transferred from the securities market to savings.At this time, the stock market will be oversupplied and the stock price will fall; otherwise, it will rise.After former U.S. President Reagan implemented the policy of lowering interest rates in 1981, the U.S. stock market was greatly stimulated. From 1982 to 1986, U.S. stock prices rose by an average of 120%.However, in September 1986, American stock investors expected that interest rates in the United States might rise, and their enthusiasm for buying stocks dropped sharply. On September 9 of the same year, the Dow Jones Index fell by 9 points; while the United States raised interest rates by 11% in August 81.61 . , Subsequently, the Dow Jones Index reacted, first fell 1987 points, and then continued to fall 8 points.Under the background of deflation and insufficient effective demand, my country announced the seventh interest rate cut on June 1, 50. The rate of interest rate cut reached 64.4%. The daily turnover of the two cities reached more than 1999 billion yuan), and the stimulating effect of interest rates on the securities market is fully revealed.

From the long-term trend of stock prices, the relationship between interest rates and stock prices is very obvious.Therefore, investors must always pay attention to the dynamics of interest rates and make correct expectations in order to "be one step ahead", gain "first-mover advantage", and seize market opportunities.

([-]) Inflation
Inflation refers to the currency phenomenon in which the quantity of currency issued exceeds the actual demand, and the external manifestation is the continuous rise of the general price level.The impact of inflation on the stock market, especially individual stocks, is more complicated.Generally speaking, when inflation is mild, it will not have a negative impact on the stock market, and may even push up stock prices, because moderate inflation is often accompanied by economic development, providing a good environment for the operating activities of issuing companies, while moderate inflation Inflation will cause investors to have a hedging mentality and buy stocks.Hyperinflation, on the other hand, causes social and economic loss of efficiency, sharp rise in raw material and labor costs, serious setbacks in business operations, decline in profitability, and even bankruptcy. Therefore, investors have no intention of investing in stocks for a long time, and stock prices fall, or even plummet.

Regarding inflation, various social and psychological factors must also be taken into account in order to have a deeper understanding of the impact of inflation on the stock market and make correct investment decisions:
(1) The government generally favors a low-inflation policy and will not tolerate the existence of inflation for a long time. It will inevitably use macroeconomic tools to curb inflation, thereby affecting stock prices.

(2) Inflation does not cause all prices and wages to change at the same rate, that is, relative prices will change.Changes in relative prices result in a redistribution of wealth and income and distortions in output and employment, with gains for some firms and losses for others.Correspondingly, the stocks of winning companies rise and the stocks of losing companies fall.

(3) Inflation not only has economic impact, but also has social impact. It affects the public's psychology and expectations, leading to changes in investor behavior, which has a huge impact on stock prices.When inflation is moderate, investors will still choose to invest in stocks, but when inflation worsens, investors’ psychological expectations will change, and the currency in their hands will depreciate. The actual income of future dividends will fall, and investors’ preference for investing in stocks will decline. fall.For example, the oil crisis once caused worldwide inflation, and the prices of industrial raw materials and means of production generally rose. The manufacturers who originally owned these raw materials were extremely excited, because the price increase increased their profits, so their stock prices rose.After a period of rapid market conditions, the inflation phenomenon did not decrease but increased, indicating that this inflation is not a recovery of the economy, and it will directly affect investors' investment expectations, and the stock price will inevitably plummet.

([-]) Economic policies

A country's economic policy has a major impact on the stock market.Under the current economic system in our country, the role of the government is to use economic means such as taxation, interest rate and monetary policy to implement macroeconomic regulation and control on economic development. The operation of the economy is still largely affected by the national economic policy, and sometimes directly interfered.In the stock market, the impact of this policy is inevitably reflected, sometimes even more strongly.

(1) Tax policy.The pure tax effect shows that an economy-wide tax increase or tax cut will cause the economy to contract or expand.As far as tax increases are concerned, on the one hand, it reduces people's income, thereby reducing their consumption expenditures and reducing aggregate demand; on the other hand, taxation directly reduces the after-tax profits of enterprises, inhibits investment, and aggregate demand declines This makes enterprises have to reduce investment, compress production and lower prices, further reducing corporate profits.Due to these two reasons, the stock price has fallen: first, corporate profits have plummeted, the expected return of stocks has decreased, and stock prices have fallen; second, personal income has decreased, and the demand for money has increased accordingly.

In addition, changes in the tax policy related to securities transaction tax (currently my country imposes stamp duty on securities transactions) will directly affect the fluctuation of stock prices. On November 1999, 11, my country began to levy interest income tax, which played a certain role in diverting savings into the stock market.

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