Question

Change in share price within 7 days of 7 May 2018 of Westpac: Track and report any change in Westpac company's share price within 7 days of 7 May 2018(provide evidence of this change tracking). Change in share price within 7 days of 7 February 2018 of Commonwealth: Track and report any change in Commonwealth share price within 7 days of 7 February 2018. What information in the half yearly financial report may have caused this change? If there is nothing in the report to warrant this share price change, then identify any market event that may be related to this share price change. Westpac's share price from 7 May to 10 May is 29.34 29.71 29.75 29.85. Commonwealth's share price from 7 February 2018 to 14 Feb 2018 is 76.99 76.51 76.25 76.25 76.25 75.88 76.30 73.98

Answer 1

Information that causes change in share prices :-

1. Information regarding financial performance of company during last 6 month leads to change in share prices.
2. Information regarding change in management also leads to change in share prices.
3. Future events that company going to do , for example merger, acquisition etc. also leads to change in share prices.
4. Dividend declaration by company leads to change in share prices.
5. Any announcement relating to issue , buyback, redemption of shares or debentures also leads to change in share prices.

Market Factors that leads to change in share prices:-

1. Returns offered by other markets:

• If the Indian markets offer high returns, institutional investors (especially FII’s) would invest in Indian markets. Demand for shares would increase and prices rise.

2. Stability of government:

• When there is a stable government, businessmen feel confident to invest in new businesses and expand existing businesses.

3. Expectations & Speculation:

• Investors who believe in the market are more likely to purchase stocks, take more risks and drive up the price of stocks.
• An example of the effects of investor confidence can be seen in the 2008 financial crisis. When investment firms began to collapse, investors lost confidence and refused to take risks and fund investments.

4. Management profile:

• Management profile significantly influences success of companies and therefore they have an important influence on share prices.
• In case the company is taken over by a management having a poor reputation then the share prices would fall.

5. Supply & Demand:

• When the price of stock is low (or supply is high), investors will buy more, creating a demand for that stock.
• After a while, the price rises (supply decreases) as investors have proven they are willing to pay a higher amount for successful stocks. When the price is too high, however, demand decreases and investors move on.

6. Changes in economic policy:

• If a new government comes into power, it may decide to make new policies.
• Sometimes these changes can be seen as good for business, and sometimes not. They may lead to changes in inflation and interest rates, which in turn may affect stock prices.

7. Inflation and Interest Rates:

• When interest rates are raised, many investors sell or trade their higher risk stocks for government-backed securities such as bonds to take advantage of the higher interest rates they yield and to ensure that their investments are protected.

8. Exchange Rates:

• Foreign currency rates have a direct impact on the price and value of stocks in foreign countries, and changes in exchange rates will increase or decrease the cost of doing business in a country, which will affect the price of stocks of companies doing business abroad.

9. Internal Developments:

• Developments that can occur within companies will affect the price of its stock, including mergers and acquisitions, earnings reports, the suspension of dividends, the development or approval of a new innovative product, the hiring or firing of company executives and allegations of fraud or negligence.
• Stock price movements will be most drastic when these internal developments are unexpected.