• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Australian Stock Exchange

Extracts from this document...

Introduction

Recent decades have seen an extraordinary surge in the level of share ownership in Australia. According to the Australian Stock Exchange, Australia has more shareholders per head of population than any other country-with over half the adult population now holding shares. This has made the operation of the share market an increasingly important aspect of the every day lives of many Australians, and a more important part of the market economy. The share market has two key roles in Australia's financial system. Its first role is to allow companies to raise funds by selling new shares to investors. A share, also known as an equity security, is a financial asset that gives its holder part-ownership of a company. The share market's second role is to allow a company's existing owners, known as share holders, to sell their shares to those who wish to buy a stake in the company. For a firm to issue shares, it must be a company- ie. it must be 'incorporated'. An incorporated business is one that is recognised as a separate legal entity from those individuals who own or manage the business. The share market deals only with the trade in shares of public companies (one whose shares are not subject to any transfer restrictions). ...read more.

Middle

The share market also allows companies to sell new shares to the public. When a company decides to list itself on the stock exchange it must set about offering its shares to the public for the first time. This process is called a float, or an initial public offering (IPO). Whenever people purchase shares in a float they are actually investing in that company. It is often beneficial for a company to float itself to access funds for investment without having to earn these funds as profits or having to borrow them from a financial institution. Additionally, once a company has listed, it can access further equity funds at any time by issuing an approved prospectus for the release of new shares. Share market values are often an indicator of a country's economic conditions. Because market prices rise in accordance with new and better economic prospects for companies, rising share prices will generally suggest that the economy is enjoying good conditions. By contrast, an economy that is moving towards recession will have fewer economic opportunities for companies, leading to lower share prices. A downturn or upturn in the share market can be measures by the All Ordinaries Index, which measures changes in the overall value of companies listed on the ASX. ...read more.

Conclusion

When one type of asset is performing well, demand for that asset is likely to increase, raising its price compared with other assets. By contrast, when an asset does not perform well, demand for that asset with fall, lowering its price compared with other asset. Investors often participate in the share market for speculative reasons and shares may be sold quickly after their market price rises. This creates a speculative bubble, in which shares prices are driven by speculation rather than financial performance. In Australia, the bursting of the 'dot.com' share price bubble in 2000 saw the Stock Exchange's IT Index fall by around 60%. The performance of the share market is closely associated with the business cycle. Despite the similar trends between the level of economic growth and the share price, the relationship between the two is neither simple, nor direct. Rather, it is a two-way relationship: economic conditions influence share prices, but share prices also influence economic conditions. In fact, the share market often amplifies changes in the business cycle. When the market experiences a downturn, it is likely that shareholders will feel less confident about their economic prospects (as their wealth has fallen). The share market has become an increasingly important part of the operation of the market economy. The share market is an efficient way for companies to raise funds needed for growth, and for individuals or other businesses to gain returns on their surplus funds. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Markets & Managing the Economy section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Markets & Managing the Economy essays

  1. Buffer Stock Scheme

    In the short run, coffee will be relatively inelastic, because the supplier cannot shift to other goods in the short run. (producer substitute). *ceteris paribus is applied here: Assuming that the demand is constant! But in the long run, the coffee will be relatively elastic, because the producers then can

  2. Case #1: Canadian Briefing Note (LCBO)

    The liquor control boards can, as single buyers, bargain for lower prices and greater special discounts from suppliers and carriers. The privately-owned outlets are fragmented and multiply rapidly and are therefore not centralized in their operations and distribution network. Privately-owned retail outlets also require higher rates of return on their

  1. Auction is defined as a method for selling an asset to the highest bidder.

    Here it is not likely for competitors to collude because, it is not easy to respond to other bidders signals. In addition it makes it easer for other bidders to enter into the auction because weaker firms find that they have better chances to win the auction.

  2. What Are The Effects Of Tescos Oligopolistic Market Structure, On Both Consumers And Producers?

    However, a supermarket must get approval every time it tries to incorporate a store from a competitor. Tesco has been investing in its stores pipeline since mid 1990's. Tesco's land bank stood at 46% of the total market in 2000 and had reached 58% by 2005.

  1. Free essay

    Gold Market. my essay will revolve around the following points ; 1)The sudden rise ...

    This marked a turning point in the use and role of Gold. Over the last decade the prices of Gold and Silver have risen sharply. For example the price of a troy ounce of gold (31.3g) has risen from an average of 270 dollars (US)

  2. Economy and how it affects my business selling tables

    Changes in the technology can boost the efficiency to produce tables quicker and better, therefore an increase in supply is expected as well as lower prices for the consumers. 3. Due to low inflation the cost of manufacturing decreases therefore the tables can be sold at a cheaper price too.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work