How Do I Start Investing In The Stock Market? (PART 3)

Understanding the Stock Market Tables

After opening the account and knowing the rules of the board lot system, the next step is to be familiar with the stock market as a whole thru the tables either seen on the computer screen on an online platform or printed in stock market page of a newspaper.  This particular section is perhaps the most disregarded section by readers.  While this may seem unimportant, it pays to know what it means and what sort of benefit can we derived from it.  And if one is offline but has a newspaper instead, this article intends to enlighten would be readers of the stock market page. The different tables are as follows:

First is the stock index snapshot.  It tells the number of “points” the index has risen or fallen in a particular trading day.  This item is similarly reported in the evening business news on TV.  One must know that the stock market index for the Philippines is known as the Philippine Stock Exchange Index (PSEi).  It is composed of 30 companies that have met the criteria to be there such as liquidity, free float level and volume traded.   One can say that the companies in this index are considered stable, liquid and actively traded in the stock exchange.  Therefore, its movement either up or down, is the average of all the rise and fall of the issues in the index. Note, however, that each company in the index has a different ‘weighting’ or representation in the index.  As of this writing, SM Investments with stock code (SM) has an 11% weighting, this means, its stock price movement in a trading day has a 11% impact on the index, up or down.  SM is the largest component of the PSEi at present.  In addition to this, one should note that relevant to this information is the value of trade on that day. It speaks of the level of activity or participation in peso value, and that the higher value traded, the better.  Say, when the value trade is high and the market went up, the market is deem to be upbeat.  Conversely, if the value is high and the market was down, the market is deemed weak.

Second is the main stock quotation page. It shows the performance of the individual stocks in a particular trading day. The notable points in the price movement are the open, high, low and close.  The open is the first transacted price upon opening of the stock market at 930 AM.  During the trading session, the highest transacted price is the high. Conversely, the lowest transacted price is the low. And when the market closes at 330 PM, the last transacted price is the close.  These prices tell the story of the trading of a stock in a particular day, notably, the move from the open to the close. A closing price higher than the open price means that the stock has attracted more buyers than sellers that day. A lower closing price than the opening means the trading session is dominated by sellers. The difference between the high and the low is the trading range where buyers and sellers have stretched the trading in a particular session.

Third is the gainers and losers table. This section shows the list of stocks performance in terms of price movement in a trading day. The top gainers are those issues whose prices went up in a particular trading session. It is the list of ten best performing stock by percentage gain in a trading day.  Conversely, the top losers are those issues whose prices went down in a particular trading session. It is the list of ten worst performing stock by percentage loss in a trading day. This section of the stock page shows where the action was.  This however, should not be confused with the most active table. It is the list of top ten stocks with most volume traded in a day with more emphasis of those issues garnering the highest peso value of trades.  These stocks are the hotly traded issues based on peso value but may not necessarily end up in the gainers or losers table.

Fourth is the dividends notice section which perhaps interests a number of investors. This section is like a bulletin of upcoming dividend payouts of some companies. Technically, there are three types of dividend payouts, cash, stock and property dividend. The cash dividend is of course, in cash. When it is a stock dividend, the company issues stocks, just like a dividend in “kind”. An important piece of information one should consider is the ex-date of the dividend. “ex-date” means the date without a dividend.  Therefore, if one would like to catch up or would like to participate on the dividend payout, he/she should buy the stock BEFORE the ex-date.  Then, wait for the dividend payment on the prescribed date which is about a week or month from ex-date.  The third type of dividend that is rarely given is a property dividend.  This type of dividend is in the form of stocks as well but of different company. Say, one time, Megaworld (MEG) issued property dividend to its shareholders by giving shares of Empire East Land (ELI).  Note, that (ELI) is a subsidiary of Megaworld, hence, they own some shares of ELI.  Property dividend is usually given in the form of stocks that the issuing company owns.  The shares issued are either listed on the stock exchange or not.

Lastly, the stock market has various indices apart from the main index like the PSEi. The Philippine stock market is subdivided into six sectors, namely, financial, industrial, holding, property, services and the mining and oil sectors.  This is much like the main index only that it represents the various sectors of the economy which gives the investor of a snapshot of a particular sector’s performance in view of one’s preference and analysis. The listing of companies in each sector can be viewed at the website of the PSE at www.pse.com.ph.  The use of this section will be discussed in a separate article under fundamental analysis.

In conclusion, the stock market tables are tools of information of what transpired in the stock market. It provides a bigger impression of what is happening in the whole economy.  As the saying goes, “the stock market is a reflection of the country’s economy” is true indeed.  One can find this useful in assessing the economy and possibly spot opportunities to make money by investing or trading stocks.

This is like having a big picture appreciation of the ocean one will explore – perhaps for the rest of his life.