A Short Glimpse of International Stock Market (Past and Present)

History:

Global economy is the economy of the world, considered as the international exchange of goods & services in monetary units of account. Stock markets are some of the most important parts of today's global economy. Countries around the world depend on stock markets for economic expansion. The first genuine stock markets did not arrive until the 15^th Century. However, there were plenty of early examples of markets, which were similar to stock markets. Stock markets were started when countries in the New World began with each other. While many pioneer merchants wanted to launch huge business, this required significant amounts of capital that no single merchant could raise alone. As a result, group of investors pooled their savings and became business partners and co owners with individual shares in their business to form joint stock companies. In 1602, the Dutch East India Co. issued the first paper shares. This exchangeable medium allowed shareholders to conveniently buy, sell and trade their stock with other shareholders and investors.

The World's first stock markets without stocks:

The world's first stock markets are generally linked back to Belgium. Bruges, Flanders, Ghent, and Rotterdam in the Netherlands all hosted their own "stock" market systems in the 1400s and 1500s. All of these early stock markets had missing "stocks". Although the infrastructure and institutions resembled today's stock markets, nobody was actually trading shares of a company.

The World's first publically traded Company:

East India Company was the first publically traded company. It was formed in 1600 called "Governor and Company of Merchant of London trading with the East Indies". This was the famous East India Company and became first company to use a limited liability formula. In 1602, the Dutch East India Company officially became the world's publically traded company when it released shares of the company on the Amsterdam Stock Exchange.  At that time, Stocks and bonds were issued to investors. This was the joint stock company to get a fixed capital stock and as a result, continuous trade in company stock occurred in the Amsterdam Exchange. Soon thereafter, a lively trade in various derivatives, among which options and repos, emerged on the Amsterdam market. Dutch traders also pioneered short selling – a practice which was banned by the Dutch authorities as early as 1610.

In the late 1600s as more financial structures were being developed in London, including the first government bonds offered in 1693 and the establishment of The Bank of England shortly thereafter, share trading at the Royal Exchange was becoming more popular. After a while, as the stock brokering grew, it is said that the stockbrokers were thrown out of the Royal Exchange because of their rude behavior so they set up trading out of the coffee houses along what was called Exchange Alley. In 1698, a stockbroker named John Castaing working out of a coffee house began posting lists of British Stocks and commodities & Dutch joint stock shares with price offerings and this activity eventually grew into a London Stock Exchange which officially formed in 1773. That can be considered as main force of the origin of the stock markets as we know today.

The first Stock Exchange in United States:

The first stock exchange was established in Philadelphia, United States in 1790 and was called the "Board of Brokers". The "Board of Brokers" later became the Philadelphia stock Exchange in 1875 and it is now part of NASDAQ known as NASDAQ OMX PHLX. The Philadelphia stock Exchange can be considered as the origin of the stock market in America rather than the New York Stock Exchange.

After the establishment of the Board of Brokers, in New York in the year 1792, 24 stockbrokers outside of 68 Wall Street Under a buttonwood tree came together to meet daily and trade stocks and bonds. Then they agreed to make the market more structured. In 1817, the group reorganized and renamed itself the "New York Stock and Exchange Board". The New York Stock Exchange (NYSE) soon became the most powerful stock exchange in the country due to the lack of any types of domestic competition and it is positioning at the center of U.S trade and Economics in New York.

London Stock Exchange was the main stock market for Europe, while the New York Stock Exchange was the main exchange for America and the world.

There are now stock markets in virtually every developed and most developing economy, with the world's largest markets being in the United States, United Kingdom, Japan, India, China, Canada, Germany, France, South Korea, Netherlands etc.

Importance:

The stock market is one of the most important ways for companies to raise money, along with debt markets which are generally more imposing but do not trade publicly. This allows business to be publicly traded and raise additional financial capital by selling shares. This is an attractive feature of investing in stocks, compared to other less-liquid investments such as property and other immoveable assets. History has shown that the price of stocks and other assets is an important part of the dynamics of economic activity, and can influence social mood.

Today, there are many stock exchanges worldwide, each supplying the capital necessary to support industry growth. Without these vital funds, many revolutionary ideas would never become a reality, nor would fundamental improvements be made to existing products. Recently such as the Global Financial crisis have promoted a heightened degree of scrutiny of the impact of the structure of stock markets, in particular to the stability of the financial system and transmission of systematic risk.

Relation to the modern financial system:

The financial system in the most western countries has undergone a remarkable transformation. A portion of the funds involved in saving and financing, flows directly to the financial markets instead of being routed via the traditional bank lending and deposit operations. The general public interest in investing in the stock market, either directly or through mutual funds has been an important component of this process.

Modern Stock markets:

Today, virtually every country in the world has its own stock market. In the developed world, major stock markets typically emerged in the 19^th and 20^th centuries soon after the London Stock Exchange and New York Stock Exchange were first created. 

Canada developed its first stock exchange in 1861. That stock exchange is the largest in Canada and the third largest in North America by capitalization. TSX, as it is known, hosts more oil and gas companies than any other stock exchange in the world, which is one major reason why it has such a high market cap.

Similarly, Iraq stock exchange is also strong publicly traded company, which is available to foreign investors. It was also one of the few stock markets unaffected by the economic crisis of 2008.

After dominating the world economy for nearly three centuries, the New York Stock Exchange faced its first legitimate challenger in the 1970s. In 1971, two organizations – the National Association of Securities Dealers and Financial Industry Regulatory Authority- created the NASDAQ stock exchange. NASDAQ is held entirely on a network of computers and all trades are performed electronically. Electronic trading gave the NASDAQ a few major advantages over the competition. Over the years, competition between NASDAQ and NYSE encouraged both exchanges to innovate and expand. In 2007, for example, the NYSE merged with Euronest to crate NYSE Euronext- the first transatlantic stock exchange in the world.

Dow Jones Industrial Average and other major indices:

Stock markets indices are an important part of modern stock markets. The Dow Jones Industrial Average is most important index in the world.

The Dow Jones Industrial Average is made up of 30 large publically –owned American companies, which play a key role in the American economy.  The DJIA is a

list of some of the wealthiest and most powerful companies in America. Notable companies currently on the DJIA include:

American Express, 3M, Goldman Sachs, General Electric, DuPont, Coca-Cola, IBM etc.

Other major stock market indices include the NASDAQ Composite, the S&P 500, and the Russell 2000.

Major Stock market crashes:

There have been a number of major crashes throughout history, including Black Thursday or Terrible Thursday of 1929, which was followed by Black Monday and Black Tuesday. During this crash, DJIA lost 50% of its value. Similarly, other major stock market crashes are:

•        Stock Market Crash of 1973-1974
•          Black Monday of 1987
•         Dot-com Bubble of 2000
•         Stock Market Crash of 2008

The Stock market crash of 1987 was the first major crash of the electronic trading era and it was notable because nobody really saw it coming. It seemed to have just happened with no immediately apparent visible reasons. In that crash, 45.5% of value fell down. Markets in Australia experienced a 42% drop while 23% drop in markets in United States and Canada.

Circuit breakers:

This system is designed to reduce the likelihood of a stock market crash. Different Stock Exchange Market use circuit breakers differently. For example, NYSE & Chicago Mercantile Exchange use 10% drop, 20% drop and 30% drop while trading.

10% drop:

10% drop before 2 PM, trading will close for 1 hr.

10% drop between 2 PM and 2.30 PM, trading will close for One half-hour.

10% drop after 2.30 PM, market stays open.

20% drop:

20% drop before 1 PM, trading will close for 2 hr.

20% drop between 1 PM and 2 PM, trading will close for One hour.

20% drop after 2 PM, market is closed for the day.

30% drop:

30% drop, no matter what time of day, the market closes for the day

World's major Stock Exchange transaction time:

World Stock Exchange Transaction Hours
Code	Stock Exchange	Trading Hours	Total Hours
DIFX	Dubai International Financial Exchange- now NASDAQ Dubai	10:00-14:00	4.00
SSE	Shanghai Stock Exchange	09.15-11.30 13.00-15.00	4.15
TSE	Tokyo Stock Exchange	09:00-11:30 12.30-15.00	5.00
ASX	Australian Securities Exchange	10:00-16:00	6.00
HKE	Hong Kong Stock Exchange	09:30-16:00	6.30
NSE	National Stock Exchange of India	09:00-15:30	6.30
TSX	Toronto Stock Exchange	09:30-16:00	6.30
BM&F Bovespa	Bolsa de Valores, Mercadorias & Futuros de Sao Paulo	10:00-17:00	7.00
NZSX	New Zealand Stock Exchange	10:00-17:00	7.00
LSE	London Stock Exchange	08:00-16:30	8.00
JSE	Johannesburg Stock Exchange	09:00-17:00	8.00
NYSE	New York Stock Exchange	09:30-16:00	8.30
RTS	Russian Trading System	09:30-19:00	9.30
FWB	Frankfurt Stock Exchange - Deutsche Borse	09:00-20:00	11.00

Top 10 Largest markets in the World:

Here is the list of top 10 world's largest market.

1.      New York Stock Exchange

2.      NASDAQ

3.      Tokyo Stock Exchange

4.      London Stock Exchange Group

5.      Euronext

6.      Hong Kong Stock Exchange

7.      Shanghai Stock Exchange

8.      Toronto Stock Exchange

9.      Frankfurt Stock Exchange

10.  Australian Securities Exchange

Tools for Modern Day Stock Market:

There are many tools used in modern stock market but most commonly used techniques in stock investment decision are Fundamental and Technical analysis.

Fundamental Analysis determines the quality and value of stock where as Technical Analysis focuses on the price and volume pattern of a stock within a certain timeframe, ranging from days to years. Thus, an analyst uses fundamental analysis in computing a company's fair value, which is what you take into consideration when buying and selling its stock. Technical analyst uses price and volume patterns when buying and selling a stock.

The most popular ways of doing, fundamental analysis is the top down approach. To find overall assessment of the macro-economic indicators that can affect a company's profitability, fundamental analysis is commonly used. Regular reports such as daily, weekly and monthly published reports of the company also helps for analyzing all the factors that could affect stock pricing intimidating. In short, fundamental analysis guides in identifying the good companies for investment.

Similarly, in the technical analysis, two most common concepts; support and resistance tools are used. Support is the price level at which the stock is holding ground as investors usually buy at this rate preventing a decrease in stock. Resistance is the price level that the stock is having a hard time surpassing as selling usually occurs. It is normally observed at peak points. Generally, this analysis guides in timing market entry and exit.

A smart investor would incorporate both methods to come up with a solid investment strategy because mix of both tools helps to take investment decisions with a sound plan.