Share Market

Share Market

The share market, also known as the stock market or equity market, is a bustling hub where investors buy and sell shares of publicly-traded companies. It plays a crucial role in the global economy, allowing individuals and institutions to invest in businesses and participate in their growth. By understanding its functioning, types, and dynamics, investors can make informed decisions and navigate the market with confidence. While risks are inherent, diligent research, diversification, and a long-term perspective can help mitigate them. 

What is a Share Market?  

The share market is a platform where individuals and institutions can buy and sell shares, which represent ownership stakes in publicly-listed companies. Investors purchase shares with the expectation of profiting from the company’s growth and success. In return, they may receive dividends and enjoy capital appreciation. Shares represent ownership stakes in companies, entitling investors to potential dividends and capital appreciation. By investing in shares, individuals can align their financial interests with the growth prospects of various industries and sectors. 

The primary exchanges in the United States are the New York Stock Exchange (NYSE) and the NASDAQ, while Singapore features the Singapore Exchange (SGX). These exchanges act as marketplaces for buyers and sellers to interact and execute transactions. They provide transparency, liquidity, and regulation to ensure fair and efficient trading. 

Understanding the Share Market  

To navigate the share market successfully, it is crucial to grasp its fundamental concepts and dynamics. A key aspect of understanding the share market is familiarising oneself with important terms such as stocks, market capitalisation, indices, and sectors. Stocks are units of ownership in a company, while market capitalisation refers to the total value of a company’s outstanding shares. Indices, such as the Straits Times Index, or STI, and the S&P 500, provide a snapshot of the overall market’s performance, representing a basket of selected stocks. 

By comprehending these essential concepts, investors can gain insights into market trends, evaluate investment opportunities, and make informed decisions to maximise their returns 

Types of Share Markets  

The share market encompasses various types that cater to different stages of a company’s lifecycle and investment objectives. Some main types of share market are: 

1. Primary Market: This is where companies issue shares for the first time through initial public offerings, or IPOs. It allows companies to raise capital by offering shares to the public. Investors in the primary market can subscribe to these newly issued shares at the IPO price.
2. Secondary Market: Once shares are listed and trading begins, the market becomes the secondary market. This is where investors buy and sell shares amongst themselves based on supply and demand. The secondary market provides liquidity, allowing investors to enter or exit positions as desired.
3. Main Exchange Market: This type of market includes the major stock exchanges like the NYSE and the SGX. It features large, well-established companies that meet stringent listing requirements. Investors can find a wide range of companies and sectors listed on these exchanges. 

Understanding the different types of share markets allows investors to choose the most suitable avenue for their investment goals and risk tolerance 

Workings of the Share Market  

The share market operates through a network of buyers, sellers, intermediaries, and exchanges. Buyers place orders to purchase shares, while sellers offer shares for sale. These orders are facilitated by brokerage firms, which act as intermediaries between investors and the exchanges. When a buyer and seller agree on a price, a trade is executed, and ownership is transferred. The share market operates on the principles of supply and demand, with prices fluctuating based on market sentiment, economic factors, company performance, and other variables. 

The share market functions based on the principles of supply and demand. Share prices fluctuate as a result of various factors, including company performance, economic indicators, market sentiment, and investor expectations. Market participants, including individual investors, institutional investors, and traders, constantly analyse and react to these factors, buying or selling shares accordingly. 

Overall, the working of the share market involves the interaction of buyers, sellers, intermediaries, and exchanges. It is a dynamic and ever-changing landscape driven by market forces and investor behaviour. 

Examples of a Share Market  

1. Singapore Exchange (SGX): SGX is the main stock exchange in Singapore. It was founded in 1999 and is the 15th largest stock exchange in the world by market capitalisation. It features companies from various sectors, including finance, telecommunications, and real estate.
2. New York Exchange (NYSE): The NYSE, founded in 1792, is the world’s largest stock exchange by market capitalisation. It lists numerous renowned American companies, including Apple, Microsoft, and JP Morgan.
3. NASDAQ: Established in 1971, Nasdaq specialises in technology and growth-oriented stocks. It is home to industry giants such as Amazon, Facebook, and Google’s parent company, Alphabet. 

Frequently Asked Questions