Have you ever wondered why the stocks market goes up and down? Have you ever wondered why the stocks market goes up and down?
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What is a stock market 📉?

According to Dar es salaam stocks exchange, the stock market is defined as a marketplace whereby listed companies such as TBL, Twiga cement, NMB and CRDB are allowed to sell shares or bonds at affordable prices to buyers who can be either you or me or institutional investors such mutual funds or pension funds or any company that is willing to buy as a part of their investment activities. The listed companies in DSE use the stock market as one of their means to raise funds to implement their business projects. For example, NMB Bank issued its very first retail bond to the market on 10 May 2016 to collect money from investors to facilitate their investment projects. This is one of the benefits for companies and banks to be listed in the Dar Es Salaam stock exchange. 

This post highlights for you some of the reasons that cause daily up and down of the stocks market.

There are various reasons which cause the stock market or an individual stock to increase or decrease it is value in the market. The reasons can be from economic variables such as rate of inflation’s, interest rates or exchange rate. Also companies fundamental factors such as annual profits, management reactions. There are so many reasons out if I start to mention all of them I will not be able to finish them all.

But a key insight is that whenever negative news publishes about the economy’s issues such as inflation or interest rate is very possible to cause the stock market to decline. Also goes the same for the companies when they publish poor profits. The most important thing to consider is that, is the news related to a specific company? Specific sector or a total stock market. In most cases, news related to the economy’s such as changes in policies affects the total stock market. For example, a recent rise in interest rate in United State caused the stock market to go down by more than 9%. The stock market hates high-interest rates because it increases inflation rates and inflation rates reduce purchasing power. 

Another key insight is that when the economy’s report shows good news such as declines in interest rates, inflation and other useful variables the stock market becomes happy and goes up. This is the same for companies in a stock market. For example, if they publish an increase of their annual returns or introduce a new product in the market their stocks price will go up. For example, whenever Apple company announce their release of the new iPhone 📲, company stocks go up. 

A last key insight to pay attention to is the management of actions and reactions in the public eyes. They are positive actions that can lead a company stock to go up temporary and verse Versa for a negative reaction. For example, When the CEO of Tesla Elon musk was seen in public smoking weed on 7 Sept 2018 the price of Tesla stocks fall as much as ten per cent to 10%.

( source pictures google, 16/2/2022 )

However, the question raised, Do the factors mentioned above are applicable in Africa or Dar Es Salaam stock exchange?

In my personal opinion, I believe that they are not or very rarely can cause changes in price movements due to not a lot of people paying attention to such factors compared to advanced financial markets like Europe or the United States. Therefore, DSE and other financial markets in Africa can be one of the safest places to invest in the world of the financial markets.

Disclaimer: This post is not intended as investment advice. It's only for learning purposes. 

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M.k Butinini
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M.k Butinini

Multiple knowledge in the financial market and investment opportunities.

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