Did You Know?

  • The Amsterdam Stock Exchange is considered the oldest in the world. It was established in 1602. After losing a fortune in the stock market, Sir Isaac Newton forbade anyone to speak the words ‘South Sea’ in his presence.
  • In 1896, Charles Dow had compiled the original Dow Jones industrial index, then made up of 12 stocks.
  • When the gold rush came to the Witwatersrand in 1886, the Johannesburg bourse was established.
  • Between May 1928 and September 1929, the average price of shares on Wall Street rose by 40% as trading volumes doubled to more than 5 million a day.
  • Securities markets are dominated by firms that are members of multiple exchanges.
  • The British South Africa Company (BSAC), which led the colonisation of Southern Rhodesia, was listed on the LSE.
  • After World War II a new exchange was founded in Bulawayo and dealing started in 1946.
  • Black Friday began in Hong Kong and spread west to Europe, hitting the United States after other markets had already sustained significant declines.
  • The first reported organised exchange allowed Japanese rice growers and merchants, in the Middle Ages to hedge seasons by trading futures contracts.
  • The Rhodesian Stock Exchange was born out of the need for capital in the manufacturing industry.
  • All members of the RSE had to be above 21 years of age and had to be British.
  • The Zimbabwe Stock Exchange Act passed in to law in 1974; it consolidated the Harare and Bulawayo Stock Exchanges paving way for a new stock exchange.
  • At Independence in 1980, the Zimbabwe Stock Exchange had 61 companies, the same number listed in 2018.
  • The high taxation and devaluation of the pound sterling in Zimbabwe after World War 2 resulted in less disposable income.
  • Between 1991 and 1997 a total of 27 companies listed on the ZSE and by the year 2000 the bourse had 72 listed companies and 13 stockbroking firms.
  • In the 1890s, the Zimbabwean economy was based on a precarious gold mining industry whose hallmark was speculation.
  • Zimbabwe Stock Exchange exists to mobilise long term capital and to provide an efficient and reliable securities market.
  • The unofficial rate of inflation in Zimbabwe before dollarisation was 89.6 sextillion percent in 2009.
  • In 2001, the ZSE was rated as the second-best performer in the world’s emerging capital markets
  • Disposable income is income remaining after deduction of taxes and social security charges, available to be spent or saved as one wishes.
  • GDP or Gross Domestic Product means the total value of all the goods and services produced within the geographical boundaries of the country for a period of one year.
  • Following the government of national unity in 2009, Zimbabwe had a period of positive economic growth for the first time in a decade.
  • With constant prices, changes in GDP must come from changes in physical production.
  • At Independence in 1980, US$1 was equivalent to Z$0.657.
  • The bonus that was paid to war veterans in 1997 was equal to 3% of the nation’s GDP.
  • Disposable income (DI) is income under the discretionary use of household sector for consumption (C) or saving (S).
  • During the Great Depression in the US, production declined by over 90%
  • The first official currency was minted by King Alyattes of Lydia in modern day Turkey
  • A business cycle is a cycle or series of cycles of economic expansion and contraction
  • In a trough, the rate of economic growth stabilises and there is no further contraction.
  • Nigeria and South Africa make up almost half of Africa’s GDP
  • Zimbabwe had one of the worst recorded hyper-inflation in world economic history
  • There are four broad types of instruments that are issued and traded on capital markets. These include, Equity (ordinary shares, preference shares), Debt (bonds, debentures), Derivatives (options, future swaps) and Hybrids (convertibles).
  • Since the Great Depression of the 1930s, when the modern study of economics was prompted, economists have sought indicators of business cycles.
  • The exchange rate is the price of a specific currency expressed in terms of another currency.
  • Commodities are the raw materials used by industry
  • An institutional investor is an organisation that invests money on behalf of others
  • The participants in money market are borrowers and lenders as well as financial intermediaries and brokers.
  • The forex market is an international network where players are connected by telephone, telex and computers and it is open 24 hours a day.
  • An institutional investor is an entity which pools money to purchase securities, real property, and other investment assets or originate loans.
  • A financial intermediary is an institution or individual that serves as a middleman among diverse parties in order to facilitate financial transactions.
  • As an individual, you can participate in the forex market through money market investment accounts at the bank, investment in government bonds, or share trading.
  • A financial intermediary helps an individual/ firm to save or borrow money.
  • A swap is a contractual agreement between two parties to make periodic interest payments to one another on the basis of an underlying asset/ instrument or a notional principal amount.
  • The Securities and Exchange Commission of Zimbabwe (SECZ) regulates the local capital markets.
  • Among the many roles of SECZ, there is the educational role which is to raise awareness on capital market operations to the Zimbabwe populace.
  • When investors buy shares of a listed entity, they become ordinary shareholders.
  • SECZ’s role is to encourage the development of free, fair and orderly capital and securities market in Zimbabwe.
  • The IPF is the last line of defence meant to provide an additional layer of protection to investors against losses when a market player fails.
  • SECZ stipulates different capital levels for entities falling under its regulation
  • Local investors are split into retail (individual) and institutional investors.
  • Between 2000 and 2007, the Zimbabwe national economy contracted by as much as 40%.
  • Manipulation occurs when a firm or individual buys or sells a security in order to create a false or misleading appearance of active trading
  • Dealers on the ZSE are also required to have passed certain modules set by the South Africa Institute of Financial Markets.
  • The Central securities Depository (CSD) has custody of certificates and maintains records of the true underlying owners
  • Money Laundering is the concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses
  • A capital gain arises where a capital asset, such as shares in a company or land, is disposed of for more than its acquisition cost
  • Tax planning is a method by which a taxpayer may organise his affairs so that his tax liability is minimised, subject to commercial and legal limitations
  • A firm should seek from customers whom it advises or for whom it executes decisions, any information about their circumstances and investment objectives that might be relevant, the principle is called Know Your Customer (KYC)
  • Withholding tax in terms of dividends paid tend to be of the order 5%-20%.
  • A general partnership is composed of partners who participate in the day-to-day operations of the partnership are who have liability as owners for debts and lawsuits.
  • The repayment of the capital invested in a bond is called redemption.
  • A person who holds ordinary shares in a company has voting rights.
  • Many investors who buy the shares of a company are oblivious of the rights that come with stock ownership.
  • A dividend is a payment to shareholders out of the profits of the company.
  • A preference share gives the holder preference over ordinary shares in terms of dividend payments and payment in a liquidation.
  • Share splits have become a more common way than scrip issues to reduce share prices.
  • Equity warrants are issued by a company giving the holder the right to acquire new shares in that company.
  • Sometimes companies pay a dividend in the form of new shares in the company called a scrip dividend or a stock dividend.
  • A prospectus is a formal document that gives details about an investment offering for sale to the public.
  • Floating is the process where a company goes from being a privately owned to a public company.
  • Order-driven markets consist of a constant flow of buy and sell orders from market participants.
  • A limit order is an order to be executed at a specified price or at a price more favourable to the customer, if possible.
  • Limit orders specify the maximum buying price or the minimum selling price.
  • Quote-driven markets are also known as a dealers market because all trades are executed through dealers.
  • Open outcry is a method of verbal and hand signal communication used by traders at stock and futures exchanges.
  • Penny stocks are shares that trade for less than 1USD and are known for their volatility.
  • There are 2 ways of calculating stock market indices. Some are calculated as an average of the shares prices of the companies comprising the index whilst some are calculated on the basis of the market capitalisation of the companies.
  • The ZSE currently facilitates the listing and trading of ordinary shares, preference shares, and fixed income instruments such as debentures, notes and bonds.
  • The highest bid and the lowest offer have precedence over all other orders
  • Transaction costs levied on buying and selling of securities on the ZSE are determined from time to time by the Ministry of Finance and Economic Development.
  • The ZSE introduced the View Only Terminal (VOT) in order to extend access of real time Exchange information to the general public.
  • Listed companies are obliged to publish their financial reports in newspapers
  • The financial statements and notes provide the raw numbers of the company’s performance and recent financial history.
  • Standardisation of reporting makes it easier to become familiar with the statements, allowing investors to identify key elements and compare company performance.
  • Inventory is reported at cost in the balance sheet, not at its sales value.
  • Most of the current liabilities of the average company are tied to trade credit extended by suppliers.
  • The owners invest money in the business and they allow the business to retain some of its profit
  • Expenses are recorded when the goods and services that generate expenses are used.
  • Convertible debentures are usually unsecured bonds or loans meaning that there is no underlying collateral connected to the debt.
  • The cost of goods sold expense means the cost of all products sold to customers during the year.
  • Every kind of fixed asset is given a minimum life over which its cost may be depreciated.
  • FIFO is an inventory costing method which assumes that the first items placed in inventory are the first sold.
  • The purpose of the cash flow statement is to disclose information about the events that affected cash flow during an accounting period.
  • A firm’s cash flows are driven by its sales growth and management’s ability to manage expenses, capital investment and financing in response to that growth.
  • Free cash flow refines the cash flow from operations by subtracting capital expenditures and dividend payments from operating cash flow.
  • Examining some of the factors behind a company’s figures will help you understand what drives the numbers.
  • Understanding the competitive environment of a firm and its standing among its competitors is a key factor in determining the sales and earnings potential of a company.
  • “Cooking the books” entails falsification of the accounting records and therefore constitutes fraud the deliberate design of deceptive financial statements.
  • Ratio Analysis is a form of financial statement analysis used to obtain a quick indication of a firm’s financial performance in several key areas.
  • Price Earnings (P/E) ratios are used by investors and analysts to determine the relative value of a company’s shares.
  • Average Price Earning (P/E) ratios tend to vary from industry to industry.
  • Market capitalisation refers to the total market value of a company’s outstanding shares.
  • An efficiency ratio measures a company’s ability to use its assets to generate income.
  • The current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations
  • Gearing is a measurement of the entity’s financial leverage, which demonstrates the degree to which a firm’s activities are funded by shareholders’ funds versus creditor’s funds.
  • Technical analysis is a very popular and powerful tool for investors.
  • Most technical tools and systems are trend following in nature, meaning they are primarily designed for markets that are moving up or down.
  • A major trend is anything over six months in the commodity markets and a year in the stock market.
  • A trend-line that has been in effect for eight months is of more importance than one that has been in effect for eight weeks or days.
  • Traders’ remorse is a situation where prices return to a support/resistance level following a price breakout.
  • Triangles typically occur as prices encounter a support or resistance level which constricts the prices.
  • A moving average shows the average value of a security’s price over a period of time.
  • The Moving Average Convergence Divergence (MACD) indicator and the Relative Strength Index (RSI) are used by analysts and day traders.
  • The Moving Average Convergence Divergence (MACD) is primarily used to gauge the strength of stock price movement.
  • The Relative Stock Index (RSI) aims to indicate whether a market is considered to be overbought or oversold in relation to recent price levels.
  • The RSI is basically an internal strength index which is adjusted on a daily basis by the amount by which the market actually fell or rose.
  • The most popular method of interpreting a moving average is to compare the relationship between a moving average of the share price with the share price itself.
  • A 14-day parameter is the one mostly used by traders.
  • The distinctive characteristic of Bollinger Bands is that the spacing between the bands varies based on the volatility of the prices.
  • Banks typically do thorough research to ascertain the viability of a project before deciding whether or not to commit any of the bank’s funds by way of a loan.
  • As of January 2019, the total world debt was more than US$240 Trillion, more than three times the size of the global economy.
  • Interest is earned daily but is only paid every six months or annually to cover the last six months’ or year’s payment.
  • When a bond is cum interest, interest will be paid on a particular date in the future, and this amount is included in its trading price.
  • Most countries quote a bond’s clean price (prices before adjustment). The buyer, however, pays the seller the dirty price (prices after accrued interest adjustment.
  • Long-term bonds have maturities in excess of 12 years.
  • A government’s budget deficit as percentage of GDP is an important percentage for investors.
  • Bond yield is the amount of return an investor will realize on a bond.
  • Discounted cash flow (DCF) is a valuation method used to estimate the value of an investment based on its future cash flows.
  • Government bonds create a benchmark against which riskier securities may be compared.
  • Government bonds are considered risk-free and are traded in highly liquid markets.
  • Most developed countries have budgets that are in deficit almost all the time.
  • Companies that are perceived to have higher credit quality find it easier to issue more debt at low rates.
  • LIBOR is an average value of the interest-rate which is calculated from estimates submitted by the leading global banks on a daily basis
  • Reinvestment risk is the variability of reinvestment returns due to a change in market interest rates.
  • Derivatives are financial instruments derived from securities or physical markets.
  • Futures can be used to gain exposure to various financial instruments including stocks, indexes, currencies, and commodities
  • Arbitrage is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.
  • The asset to which the contract relates is generally referred to as the underlying asset.
  • A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments.
  • Every saving and investment product involves different risks and returns.
  • Interest risk affects the value of bonds more directly than stocks and is a significant risk to all bondholders.
  • The most effective way to manage investing risk is through diversification.
  • A solid understanding of risk in its different forms can help investors to better understand the opportunities, trade-offs, and costs involved with different investment approaches.
  • Some individuals have a high tolerance for risk while other investors are risk-averse.
  • Indexation might be used by governments as a means of control over the economy as a way to potentially alleviate the negative effects inflation can have.
  • Sometimes portfolios are managed by using a combination of active and passive techniques.
  • Time diversification can reduce the impact of poor investment behaviour (a lack of discipline) or unlucky timing.
  • By diversifying investments, you substantially reduce the risk of the single security.
  • The most important principle of trading is ‘buy low and sell high’
  • Warren Buffet the world-renowned investor is a Value Investor.
  • Traders buy options to speculate or to hedge current holdings, as well as generate income through option writing.
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