Share price ? – Shares are defined in their simplest form as shares of the assets that the company owns and sells to investors, and one of its characteristics is that it is salable, and it receives a share of the company’s profits if distributed. Usually, the company’s share price is linked to its market value, but there are other factors that lead to an increase or decrease in the share price, and one of the most prominent and common of these factors is supply and demand, that is, if the company’s supply
What are the factors that affect the share price?
The following are the most prominent factors that would raise or lower the share price:
Basic factors
The owner company, or the offering of shares, is the main factor in the share price, and its economic performance is directly related to the share price. If the company shows success in its business, its share price will start to rise, and in the opposite case, its share price will start losing value.
Inflation
Inflation refers to an increase in the prices of goods and services in the market and consequently a decline in the purchasing power of consumers. This results in a decline in the sales of companies and thus a decline in their profits, which is negatively reflected on the company’s share price.
Deflation
Although deflation is the opposite of inflation, it has the same effect on share prices, as deflation means lower prices for goods, and although sales are higher, profits are dwindling. Sometimes deflation may lead investors to sell the shares they own; this increases the supply and consequently the share loses its value.
Profit distribution
When the company announces the distribution of quarters to the owners of the shares, this may reflect either negatively or positively on the share price, as if the profits are equal to or higher than expected, the stock price will rise, and if they are less than expected, the stock price will fall.
Bank benefits
When central banks increase the interest rate on loans in order to control the economy, the borrowing companies increase their debt burden, which means that their total profits will decrease, so the shareholders’ shares of profits decrease, which in turn leads to a decline in the stock price.
Policies and legislation
When governments issue new legislation related to one of the economic sectors, and these legislations are positive from the point of view of investors, they tend to buy shares belonging to this sector, which increases the price of shares in it; if the legislation is negative, investors will leave this sector, resulting in a decline in share prices; and when governments issue new legislation related to another economic sector, they tend to buy shares belonging to that sector, which decreases the price of shares in it; and when governments issue new legislation related to another economic sector,
Foreign investment
Usually the rise in stock prices is associated with an increase in foreign investments in the market, and in the event of the withdrawal of these investments, the prices of stocks in the market decline.
Credit availability
In the event that loans are available without many restrictions, investors usually borrow and invest in stocks, which increases the demand for them and thus increases their price.
Read also: What is meant by stocks and what are their types?
