Top stock market terms
Mar 13, 2021
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To understand the stock exchange and how it works, you need to understand many stock market terms.
- Stock Market: a market where the shares of the company’s that are listed in the market are buying bought and sold
- Stocks: These are the company fractions used for trading on the stock market. In other words, traders and investors who buy or sell in a company do so through shares or stocks.
- Bull market: When stocks are rising, this usually leads to a bull market; a rising market.
- Bear market: The opposite of a bull market, this is when the bourse is declining.
- Closing price: Every day, shares end at a certain level. This ending is called the closing price. A share can go up or down or remain stable until closing time for the stock exchange.
- Opening price: Every day shares begin trading at a specific price called the opening price.
- Dividend: This is the profit shareholders get after a company makes a profit. In some cases, a company’s board of directors may decide not to distribute profits and reinvest those profits in the company’s projects or expansion plans.
- Shareholders: These are the people or entities or companies who own shares in a company.
- Fiscal year: Also known as an accounting year, a fiscal year (FY) represents a year for all bookkeeping activities done by a company. In Egypt, many companies’ fiscal year begins on 1 July and ends on 30 June. In other cases, the FY is the same as the calendar year, starting 1 January and ending 31 December.
More definitions you need to know
We’ve covered the basic stock market terms.
Now we’re moving on to more focused terms and concepts that relate to stock exchanges and ownership in general.
- Merger: It is the process of combining of two or more companies to form a larger entity. A well-known merger in was that of the National Bank of Abu Dhabi and First Abu Dhabi Bank to produce First Abu Dhabi Bank (FAB).
- Acquisition: This is when a company buys another company by buying all shares in the other company. The process is called acquisition.
- Portfolio: If you are a shareholder in one or more companies, then you have a portfolio of your investments.
- Market Capitalization: It is a metric used to calculate the value of a company based on the number of shares it has. For example, a company with a share price of EGP 10 and 1 million shares has a market capitalization (or market cap) of EGP 10 million. This metric is used to “define the value of a company when analyzing potential trade opportunities,” explains Investopedia.
- Bonds: These are another type of securities but are in the form of debt. The EGX explains it best: “A bond is an evidence of debt on which the issuing company usually promises to pay the bondholder a specified amount of interest for a specified length of time, and to repay the loan on the expiration date. A bondholder is a creditor of the corporation, not a part owner, as is the shareholder.”
Indices in Egypt’s stock market
Looking at the EGX, it’s important to know what the three main indices are.
- EGX30: This is the main index in the Egyptian Exchange and comprises the top 30 companies in terms of activity and liquidity. It has the highest effect on the overall performance of the market.
- EGX70: This index includes 70 active stocks but excluding the most active stocks which are part of the EGX30 index.
- EGX100: This index combines the companies on both the EGX30 and the EGX70.
Egypt-related stock market terms
You now know a lot of about the stock market and especially the EGX. If you are reading any news pieces, you’ll see comments and news from and about these two financial entities.
- CBE: This is the Central Bank of Egypt (CBE). It is the ruling body for anything and everything related to money in Egypt.
- FRA: This is Egypt’s Financial Regulatory Authority (FRA). This is the governing body for the financial sector and services in Egypt.
Conclusion
You now have a good idea about the stock market in general, and in Egypt in particular. You also know the main terms related to the bourse.
You’re probably thinking “What next?”
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