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Home > Seminar > 29 September 2003

Understanding Economics, Mastering the Stock Market



29 September 2003



Petaling Jaya (Jointly held with Sin Chew in Chinese)


Course Objective :
To be a successful investor in the stock market, having the necessary skills is crucial. It is not hard to find books, seminars or workshops about the various aspects of investment in the market. Most of those usually give extensive coverage to different aspects of investment methodology where the financial and accounting issues receive the primary attention. There is also no shortage of materials about technical analysis in the market. On the other hand, there are relatively few books or seminars on the “economic” aspect of investment. As a result, most investors tend to be more familiar with terms like PE ratios, profit before tax or the different chart patterns than economic indicators like money supply and current account balance.
However, it is well known that economic data move markets. As Malaysia's equity market becomes more transparent and mature, the periodical release of economic data is expected to receive greater attention as shown in the US. Therefore, it is essential for investors to be knowledgeable about key economic indicators and how they affect the stock market.
A sound understanding of economics is also an essential part of managing a successful business. For example, having a good grip on the underlying economic conditions is invaluable when making sales projections, hiring or expansion plans as well as other strategic decisions.
It is with this backdrop that Capital Dynamics and icapital.biz would like to conduct a seminar on economic indicators, helping investors and businessmen make sense of the economic data and use them to make better investment decisions in the stock market as well as managing their businesses. The seminar would cover eight groups of economic indicators and explain how these indicators can be used to analyse the economic conditions. It would provide specific examples on how specific investment decisions both in the stock market as well as in real business are linked with the economic data. After attending this seminar, participants would be more thoroughly equipped to invest intelligently in the stock market as well as manage a successful business.


Course Outline




Welcome speech by Mr. Tan Teng Boo


GDP, Consumption Indicators, Investment Indicators, Sectors
(Low Guat Meng)


1. National Account
GDP/GNP is the broadest measure of the health of an economy. It is important to understand and track this economic indicator because positive economic growth signifies economic expansion which translates into higher profits for companies and provide better returns for investors. Economic performance also determine a country's economic policy.

2. Consumption Indicators
Private consumption is a very important determinant of overall economic growth. Since GDP data usually is only available quarterly, it is crucial to monitor monthly consumption data to get a clue on the underlying economic trend. Depending on the country, the available consumption indicators are auto sales, retail sales, consumer confidence index, personal income related data and more.

3. Investment Indicators
Investment expenditure is another important determinant of economic growth. Fluctuations in investment affect GDP growth greatly. In addition, investment spending determines the production capacity of the economy and thus affects the economy's long-run growth rate. Increase in investment spending reflects an optimistic economic outlook. Investment indicators vary according to countries.

4. Sectors
An economy is made up of different sectors. One can also analyse the economic conditions by monitoring developments at the various industry levels. There are many sector-specific indicators which allow us to track the developments of the different sectors of the economy.


Tea Break


Sectors, Labour Market Indicators, Money Supply, Interest Rates, Inflation.
(Low Guat Meng)


5. Labour Market Indicators
The conditions of the labour market portrays the overall health of the economy. It is an important determinant of personal consumption expenditure. Since a healthy labour market provides social and political stability, the state of the labour market plays a significant role in deciding the direction of a government's policy. While the most widely followed labour market indicator is the unemployment rate, the seminar will also look into other labour market related indicators.

6. Monetary indicators, interest rates, inflation
Monetary conditions, interest and inflation rates have a great influence on the performance of the economy and stock market. Stock markets and the economies generally perform better with low interest rates and high liquidity. Having strong economic growth with price stability is the goal of every country. Interest rate and money supply are some of the instruments used to achieve the goal.




External Trade, Balance of Payment, Leading Indicators
(Low Guat Meng)


7.Balance of Payments
With increased globalisation, economic influences from abroad have an increasing effect on the domestic economy. The balance of payments is the record of the transactions of a country's residents with the rest of the world. It is an indicator of the health of a country's external sector. The conditions of the external sector affect a country's reserves level, exchange rates, interest rates and economic growth.

8. Leading indicators, coincident indicators, lagging indicators
To invest successfully, one has to always look forward and try to identify the turning points of a business cycle. The index of leading indicators helps to predict the turning points of a business cycle 6-9 months ahead. The coincident index reflects the current economic condition and is used to date the business cycle. The lagging index plays an ancillary role in confirming turning points in the business cycle.


Tea Break


Economics, The KLSE and Managing Your Business
(Tan Teng Boo)


Questions and Answers
(Low Guat Meng & Tan Teng Boo)




Click HERE for photo gallery of the seminar