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Investing in the Stock Marketwebsite: www.pse.com.phe-mail: [email protected]: (632) 688-7536 www.facebook.com/pages/The-Philippine-Stock-Exchangehttp://twitter.com/PhStockExchangehttp://thephilstockexchange.multiply.comA presentation prepared by the Market Education Department Capital Markets Development Division

www.pse.com.ph Stocks: Types, classes, and forms Investment Instruments Concept of Risks and RewardsTable of Contents Stocks Stock Market

www.pse.com.ph Trading Schedule Understanding Stock Market Quotes Sources of Market InformationTable of Contents Opening a Trading Account Primary and Secondary Marketswww.pse.com.phSTOCKS are shares of ownership in a corporation. When you buy stocks of a publicly listed company, you become a stockholder or shareholder of that company. In other words, you become a part owner.

Thus, you participate in the companys growth and future profits.

Conversely, you may also lose if the company suffers a loss or performs below market expectations.

STOCKDefinition and concept

STOCKS are shares of ownership in a corporation. When you buy stocks of a publicly listed company, you become a stockholder or shareholder of that company. In other words, you become a part owner.

Thus, you participate in the companys growth and future profits.

Conversely, you may also lose if the company suffers a loss or performs below market expectations.www.pse.com.phSTOCK MARKET is a place where stocks are bought and sold. The Philippine stock market is the place where people can invest in publicly listed corporations.

STOCK MARKETDefinition and concept

On the other hand, the stock market is a place or venue where shares of stocks (also called equities) are traded (bought and sold). www.pse.com.ph

STOCKSAccording to typesPREFERRED STOCK is a security whereby the holder has a higher claim on the assets and earnings of the company.

Preferred shareholders have priority over common shareholders in the event of liquidation and they have a fixed dividend.

Unlike common shareholders, preferred shareholders do not have voting rights.

COMMON STOCK is security whereby the holder exercise control by electing board of directors and voting on corporate policies or matters.

In the event of liquidation, common stockholders have rights to the companys assets only after preferred stockholders have been paid in full.

Stocks are classified according to types and classes, depending on the characteristics and earnings potential. According to types, there are preferred and common stocks.

Preferred stock owners have priority or preferential rights on the companys assets and earnings in the event of liquidation. Though they have this privilege, preferred stockholders do not have voting rights unlike a common stockholder.

Common stock, meanwhile, is a security whereby a holder exercise control through voting rights during annual or special stockholders meetings but can only claim rights to the companys assets and earnings when preferred shareholders are already paid in full. www.pse.com.phCLASS A STOCKS are shares that can be bought or sold solely by Filipino investors.

STOCKSAccording to classCLASS B STOCKS are shares that can be bought or sold by both Filipinos and foreign investors.

According to class, we have Class A and Class B stocks or according to ownership. Class A stocks are those which can be exclusively traded by Filipino investors while Class B stocks are those that can be bought and sold by both Filipino and foreign investors. www.pse.com.phBLUE CHIPS are the share of stable, profitable, and well-known public companies.

They have a long history of steady revenues and dividend payments.

They exhibit more modest but dependable returns and are relatively of lower risk.

STOCKSOther types

Other types of stocks include: Blue chip stocks are those of well-established and financially sound companies that have demonstrated its ability to pay dividends in both good and bad times. Though there is no formal definition or criteria to classify a stock as blue chip, analysts generally describe it as shares of stable, profitable, and well-known listed corporations. They have a long history of steady revenues and dividend payments. They also exhibit more modest but dependable returns and are relatively of lower risk.

www.pse.com.phINCOME STOCKS are equity security that pays regular, often steadily increasing dividends, and offers a high yield that may generate the majority of overall returns.

It has a lower level of volatility than the overall stock market.

STOCKSOther types

Income stocks are described as those with good dividend payment history due to steady profits. Since they are stable, it has a generally lower level of volatility. www.pse.com.phGROWTH STOCKS are shares of corporations whose earnings are expected to grow at an above-average rate relative to the market.

A growth stock does not usually pay dividend. Rather, earnings are reinvested in capital projects.

STOCKSOther types

Also called glamour stocks, companies that are posting revenues higher than its industrys are referred as growth stocks. Its high earnings are reinvested for expansion. www.pse.com.phDEFENSIVE STOCKS are shares that provide constant dividend and stable earnings, regardless of the overall condition of the stock market.

They remain stable during the various stages of the business cycle.

STOCKSOther types

Defensive stocks remain stable under difficult economic conditions. Generally, these are stocks of food, oil, and utilities companies, which are characterized by steady demand amidst hard times. www.pse.com.phCYCLICAL STOCKS are those that rise quickly when economic growth is strong and falls rapidly when growth is slowing down.

STOCKSOther types

Cyclical stocks are those sensitive to business conditions or cycles, strongly tied with the economys performance. These companies produce or offer services that are low in demand during slowdown and increases when business peaks. www.pse.com.phSPECULATIVE STOCKS are those that rise quickly when economic growth is strong and falls rapidly when growth is slowing down.

STOCKSOther types

Speculative stocks are considered very risky because of its volatility. It increases or decreases rapidly, depending on the economic conditions.www.pse.com.phFIXED INCOME INSTRUMENTS are those that provide a return in the form of fixed period payments and the eventual return of principal at maturity.

Examples are savings, Treasury bills, and government bonds.

INVESTMENT INSTRUMENTSFixed Income vs. Variable Income

VARIABLE INCOME INSTRUMENTS are those that provide a return based on an underlying measure such as short-term interest rates.

Fixed income instruments are those that promises a fixed stream of income over a definite period of time and eventual return of the principal at maturity. Examples are savings, Treasury bills, and government bonds.

At the other end of the spectrum are variable income instruments. Unlike fixed income, variable income instruments are those that provide a return dependent on various metrics such as interest rates. They dont guarantee a fixed amount of returns.

www.pse.com.phRISK PROFILE

RISK AND REWARDInvestment PyramidThe RISK-REWARD Concept: The higher the risk of an investment instrument, the higher returns you should receive in the future.

In investing, one should identify and understand his/her risk profile. The spectrum of risk appetite ranges from the low risk or conservative investors to the high risk or aggressive ones.

Investment instruments available in the market can be classified as low, medium, or high risk. Risks are associated with the market returns or gains. Low risk investments, such as cash, savings, and bonds, offer low returns correspondingly.

Meanwhile, providing higher yields are high risk investments like options and futures.

Equity investments are categorized as medium to high risk, offering relatively higher yields compared against savings, bonds, or Treasury bills. www.pse.com.ph

TYPES OF MARKETSPrimary and Secondary MarketsPRIMARY MARKETThe higher the risk of an investment instrument, the higher returns you should receive in the future.

There are two types of market: Primary and secondary. The primary market is where new issues or securities are offered to the investing public. Companies conduct capital raising activities in the primary market. In the stock market, it is done through a process called Initial Public Offering or IPO. The issuing company receives cash proceeds from the IPO to expand its business. The flow of transaction is from the issuing company to the investing public. www.pse.com.ph

TYPES OF MARKETSPrimary and Secondary MarketsSECONDARY MARKETis where investors purchase securities or assets from other investors, rather than from issuing companies themselves.

Once the initial sale (or IPO) is complete, further trading or buying and selling of shares is now conducted in the secondary market. The flow of transaction is among the investing public already. www.pse.com.ph

OPENING A TRADING ACCOUNTInvestment ProceduresSelect your STOCKBROKER.

Open a TRADING ACCOUNT.

Discuss with your broker the stocks you wish to BUY or SELL.

Give ORDERS to the brokers.

Get the CONFIRMATION RECEIPT.

Deliver / pay before SETTLEMENT DATE.

Receive PAYMENT.

Getting started in the stock market is a simple process. First step is the select your stockbroker. There are more than a hundred stockbrokerage companies to choose from. Your choice of stockbroker should depend on the type of service you will require and who will best suit your needs. For details, the full listing is available in the PSE website (www.pse.com.ph).

Next step is to formally open an account Representatives of the stockbrokerage company will ask you to fill out a Customer Account Information Form or CAIF. Accomplish this along with the other requirements.

After opening a trading account, you can now start discussing with your broker the stocks you wish to buy (or sell).

Placing an order to buy or sell a stock can be done by making a telephone call or texting to your stockbroker or directly online via Internet. Traditional brokers are those who assign a licensed salesman to handle your account and take your orders via written instruction or through a phone call. Online brokers, on the other hand, are those whose main interface with their customer is through the Internet.

Once your order has been carried out, your stockbroker will give you a confirmation invoice showing the details of your transaction.

The delivery or payment should be before the settlement date. For traditional brokers, settlement of transactions is usually done after three working days from the transaction or T+3. For online brokers, settlement of all transactions is done on the transaction date. www.pse.com.ph

TRADING SCHEDULEDay and Time9:00 AM 9:15 AM PRE-OPEN

9:15 AM 9:30 AM PRE-OPEN (No cancellation period)

9:30 AM MARKET OPEN

9:30 AM 11:57 AMCONTINUOUS TRADING

11:57 AM 11:59 AMPRE-CLOSE (No cancellation period)

12:00 NN MARKET CLOSE

12:00 NN 12:10 PMTRADING AT-LAST (Run off)

12:10 PMMARKET CLOSE

Trading starts at 9:00 AM and ends 12:10 in the afternoon.

Pre-open begins at 9:00 AM until 9:30 AM, divided into two phases.The first phase is from 9:00 AM to 9:15 AM. At this time, no matching can occur but traders can enter, modify, or cancel orders. Meanwhile, the second phase starts from 9:15 AM to 9:30 AM, when traders are already allowed to enter orders but are disallowed to modify or cancel orders.

Market opens at 9:30 AM with the opening price determined.

Trading continues from 9:30 AM until 11:57 AM when orders are queued and or matched.

At 11:57 AM, market enters the pre-close phase. This is similar to the pre-open whereby cancellation is prohibited.

Market closes and closing prices determined at 12:00 NN.

From 12:00 NN to 12:10 PM or the market run-off, traders can enter Limit Orders only at closing price.

At 12:10 PM, market is officially closed for the day.

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STOCK MARKET QUOTATIONSReading and AnalyzingNAME The stock symbol of the listed company.

OPENThe first price the stock traded for the day.

BIDThe highest buying price in the market.

ASK The lowest selling price in the market.

HIGHThe highest price traded for the period.

LOWThe lowest price traded for the period.

CLOSEThe last traded price of the stock at noon of the trading dayNAME The stock symbol of the listed company.

OPENThe first price the stock traded for the day.

BIDThe highest buying price in the market.

ASK The lowest selling price in the market.

HIGHThe highest price traded for the period.

LOWThe lowest price traded for the period.

CLOSEThe last traded price of the stock at noon of the trading day

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STOCK MARKET QUOTATIONSReading and AnalyzingVOLUME OF SHARES The total number of shares traded in the stock market during a period.

VALUE OF SHARESThe currency value of shares traded in the market during a period.

Trading in the stock market is measured by the number of transactions traded and its value.

VOLUME OF SHARES The total number of shares traded in the stock market during a period.

VALUE OF SHARESThe currency value of shares traded in the market during a period.

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STOCK MARKET QUOTATIONSReading and AnalyzingPHILIPPINE STOCK EXCHANGE COMPOSITE INDEX (PSEi)is a fixed basket of 30 common stocks of listed companies, carefully selected to represent the general movement of the stock market.

It is the benchmark measuring the performance of the Philippine stock market.

The selection of these companies is based on a specific set of criteria.

The stock markets performance is reflected in the PSEi, or the Philippine Stock Exchange Composite Index. Formerly called Phisix, the PSEi acts as the barometer of the stock market. It is a fixed basket of 30 common stocks of listed companies, carefully selected to represent the general movement of the stock market.

The 30 stocks are determined based on a set of numerical criteria (i.e., market capitalization, trading activity, price, revenue, among others).

The PSE Corporate Planning and Research Section is tasked to conduct the regular review of the PSEi every six months. www.pse.com.ph

STOCK MARKET QUOTATIONSReading and AnalyzingGAINERSThe stocks with the highest percentage increase in price during a period.

LOSERSThe stocks with the highest percentage decrease in price during a period.

MOST ACTIVEThe stocks with the most frequent transaction during a period.

The performance of stocks in the market are categorized as GAINERS, LOSERS, AND MOST ACTIVE.

GAINERSThe stocks with the highest percentage increase in price during a period.

LOSERSThe stocks with the highest percentage decrease in price during a period.

MOST ACTIVEThe stocks with the most frequent transaction during a period.

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SOURCES OF INFORMATIONBroadsheets and Daily Quotations

Up-to-date and factual market information can be easily accessed through various mediums. We have newspapers (available in print and online) and the PSE Market Quotations uploaded in the PSE website daily.

www.pse.com.ph

SOURCES OF INFORMATIONTelevision and Radio

Information and news about the PSE, stock market, and stock investing can be seen and heard on TV and radio (AM and FM). PSE has different partners in the media industry to conduct its stock market segments and programs. International markets can also be monitored on TV via CNN or NBC, to name a few.www.pse.com.ph

SOURCES OF INFORMATIONData Providers

Market information are also accessed through data vendors such as Bloomberg, Thomson Reuters, and Technistock. You can subscribe to their financial information products. www.pse.com.ph

SOURCES OF INFORMATIONInternet

The Philippine Stock Exchange, Inc.http://thephilstockexchange.multiply.comhttp://twitter.com/PhStockExchangewww.pse.com.phPSE / MED SOCIAL SITESOFFICIAL PSE WEBSITEDisclosures and market information are found in the PSE website. Via social sites, PSE created accounts in Facebook, Multiply, and Twitter for information dissemination. www.pse.com.ph

SOURCES OF INFORMATIONElectronic Billboards

Announcements and stock quotes are flashed in our electronic boards in Ayala Avenue and Ortigas Center. Investing in the Stock Marketwebsite: www.pse.com.phe-mail: [email protected]: (632) 688-7536 www.facebook.com/pages/The-Philippine-Stock-Exchangehttp://twitter.com/PhStockExchangehttp://thephilstockexchange.multiply.comA presentation prepared by the Market Education Department Capital Markets Development Division