Glossary

Assets – Everything that a person or a company owns. Cash, investments, property and anything that has a value and can be claimed in the event that a person or company becomes bankrupt.

 

Arbitrage – Buying and selling the same or equivalent securities at the same time in different markets to take advantage of a price difference.

 

Bear – A person who expects prices to fall and sells securities hoping that he will make a profit by subsequently repurchasing at a lower price. If his judgment is wrong and the prices rise, he makes a loss instead of a profit.

 

Bear Market – A falling market or when prices of most the stocks listed on the market are falling.

 

Bid – The price at which someone is prepared to buy shares. Also known as “buying price”

 

Blue Chip Stocks – Shares that are usually high priced, of a company known for its ability to make profits in good times or in bad times.

 

Bond – Document recording a loan made to a government or semi government body for a fixed rate of interest. The government guarantees repayment of the loan and interest.

 

Bonus Issue – the issue of bonus or free shares to existing shareholders, usually in a predetermined ratio e.g. one bonus share for every three shares held.

 

Books Closing Date – The date on which a company closes its books to determine those shareholders registered for a dividend, new issue etc.

 

Boom Market – A market in which buying demand greatly exceeds selling pressure. This inevitably leads to price rises.

 

Broker – refer to stockbroker

 

Brokerage – Fees charged by the broker for acting on your behalf in buying and selling shares.

 

Bull – A person who buys securities in the expectation that price will rise and so give him an opportunity to resell at a profit.

 

Bull Market – A rising market, where share prices of most stocks are rising.

 

Capital Gain – Profit from the sale of capital assets such as shares. Investors often buy securities for the sake of expected increase in value rather than for dividend prospects

 

Capitalization – In stock market terms, the value of a company that is share price multiplied by the number of shares on issue.

 

Contract Note – Document sent to a buyer or seller confirming that transaction and showing details as to price, brokerage and any other charges involved.

 

Contributing Shares – Shares that are not fully paid. Usually refers to No Liability Companies.

 

Convertible Notes – A Loan made to a company at a fixed rate of interest with a right to be either redeemed for cash of converted into ordinary shares at a predetermined date or within a certain period.

 

Cum – Meaning ‘ with ‘e.g. “cum dividends” means that the shares are being traded with the current dividends i.e. the buyer receives the dividend declared.

 

Cum-Dividends – Shares quoted “cum-dividends” entitle the buyer to the dividends then current.

 

Cum Rights – Shares quoted “cum-right” entitle the buyer to participate in a new issue of shares then current.

 

Debentures – A loan made to a company for a fixed period of time at a fixed rate of interest. The loan is secured by a charge over the company’s assets.

 

Deferred (dd) – Shares quoted “dd” are the result of a reconstruction of the company’s share capital where shareholder have surrendered old scrip to the company but the company has yet to issue new scrip. Shareholders who wish to sell must do so on a “dd” basis so buyers know that they cannot yet expect delivery of scrip.

 

Delisted – Removed shares or securities that were once quoted on the Stock Exchange.

 

Discount – The amount by which a security is quoted below its face value. The opposite is premium.

 

Dividend – Distribution of part of a company’s net profit to shareholders as a reward for investing in the company. This is usually expressed as a percentage of the par value or as toea per share.

 

Earnings Per Share (EPS) – Company’s net profit divided by the total number of shares in the company. Usually expressed as toeas per share.

 

Equity – Ownership, usually through ordinary shares.

 

Ex – Means ‘without’ e.g. “ex dividend” indicated that the shares are being traded without the current dividends so the seller retains the dividends declared. Shares traded without the current bonus, rights, or entitlement issues are also quoted “ex”

 

Ex – Date – The date on which shares change from being quoted “cum” to “ex”. It is usually the fifth business day prior to the books closing date.

 

Ex – Dividend – Securities are quoted “Ex-Dividend” five business days before the company’s books close to determine shareholders entitled to the dividends.

 

Float – The initial raising of capital by public subscriptions to securities.

 

Growth Stock – Stock with good prospects for future expansion, so promising capital gain. Immediate income prospect may be modest.

 

Inside Information – Confidential information available to a small number of people.

 

Institution – In the investment context, this refers to those bodies with large pool of funds for investment.

 

Interim Dividends – A dividend paid during the year and not at the end. Most profitable companies pay dividends every half-year.

 

Joint Venture – An agreement for two or more parties to jointly explore, finance or direct a particular development. The holdings in this venture may not necessarily be equal.

 

Leverage – Refers to the process of increasing funds available for investment through borrowing.

 

Liabilities – items owed by a person or company to another party

 

Limit (AT) – Instruction given to a broker to buy or sell shares at a certain price or better

 

Limited Liability (LTD) – The liability of the shareholder in this type of company is limited to the extent of any unpaid capital on his shares.

 

Listed Stock – Securities, which are approved for admission to trading on the Stock Exchange.

 

Liquidator – A person appointed to take charge of a company when it is wound up.

 

Margin – Money put up by a client for the purchase of a stock under a forward contract.

 

Market Price – The prevailing price to buy and sell a security on the open market

 

Offer – the price at which someone is prepared to sell shares. Also known as selling price.

 

Official List – Names of securities listed and quoted on the Stock Exchange.

 

Operator – Employee of a brokering company who operates on the trading floor and effects orders placed with his firm.

 

Order – Instructions by clients to buy or sell securities.

 

Par – Nominal or stated value given to shares by the articles of a company. It often has no relation to the asset value or worth of shares.

 

PETS – Port Moresby Stock Exchange Electronic Trading System

 

Placement – An allotment of shares, debentures, etc made directly from the company to investors, rather than through the medium of a cash issue.

 

Portfolio – Investor’s holding of securities of various types. The wise investment is to build up a balanced portfolio according to personal requirements. Your broker will help you plan this.

 

Premium – the amount by which a security is quoted or issued above its par value. The opposite is discount.

 

Proxy – Written authorization given by a shareholder to another person to vote on his behalf at a company meeting.

 

Prospectus – Documents issued by a company setting out the terms of its public issue or debt raising. Subject to the rules of the Stock Exchange, Securities Commission.

 

Rally – Short spirited price rise

 

Reconstruction – A company may adjust its capital issues by reconstructing its shares into units of greater face value. The opposite is share split.

 

Right – A privilege granted to shareholders to buy new shares in the same company, usually below the prevailing market price. A right can be exercised or sold. They are usually issued on a predetermined ratio, for example, one right to every four shares held.

 

Scrip – A document with an identifying number that states that person is the registered holder of a number of securities. The most common form of scrip is a share certificate.

 

Securities – refers to the type of investment offered by a company or authority e.g. shares.

 

Share – An equity or part ownership of a company.

 

Share Price Index – Index, which measures the level of share prices at any given time.

 

Speculator – One who purchases shares in anticipation of selling them shortly thereafter at a profit.

 

Split – A Company may adjust its shares into units of lesser face value. Such splits of say K1.00 into 50toea shares help small investors and tend to make company shareholding more widespread.

 

Stockbroker – A Stock Exchange Member who buys and sells stocks shares and securities for clients.

 

Takeover – When companies or individuals wish to obtain control or to buy out an existing company the bidder will circularize the shareholders bidding a certain price per share.

 

Trusts – Investments which involve pooling investors’ money and have experts invest that money for the individuals. Trusts almost always concentrate on one area of investment. The three most common are Equity, Property and Cash Management.

 

Underwriter – One who arranges a new issue of securities and agrees to purchase any unsold securities thereby guaranteeing full subscriptions.

 

Winding up – The cessation of business through a court order, or by a special resolution by creditors or shareholders. Assets must be realized to provide for the liabilities and expenses of the business.

 

Yield – Effective return to investors from a particular security, expressed as a percentage of the current market price. So shares of K2 nominal value may give a 10% dividend but if the market is K4 then the dividend yield is 5%