The period for which the affairs of a company are being
accounted for. The matching principle ensures that the incomes for the
accounting period are offset against the expenses for the same period to
arrive at the profit. The balance sheet shows the asset and liability
position at the end of the accounting period. Companies are required to have
an annual accounting period.
For public companies, the accounting policies are set out in the
first note to the accounts. They usually concern the method used to value
stock and depreciate assets, the principles used in consolidating accounts,
the method by which leases are charged, provisions made for deferred
taxation, exchange rates used to value foreign currencies, what constitutes
turnover and other items specific to the company.
These are amounts reflected in the balance sheet as owing to the
company's creditors in the balance sheet. These appear under current
liabilities. These amounts owed to the company the short term, usually as a
result of purchases on credit.
Money owed by customers (individuals or corporations) to another
entity in exchange for goods or services that have been delivered or used,
but not yet paid for. Receivables usually come in the form of operating lines
of credit and are usually due within a relatively short time period, ranging
from a few days to a year.
When the volumes traded in a share start to pick up while the
share price moves sideways or upwards, this is known as an accumulation
phase. It indicates that the share is becoming stronger - after a period of
accumulation, the supply of shares will be exceeded by the demand and this
may lead to a sharp upwards move in the share price.
The first phase of a bull market. The period when farsighted
investors begin to buy shares from discouraged or distressed sellers. The
public is completely disgusted with the stock market. Volume is only
moderate, but beginning to increase on the rallies.
A person with expertise in evaluating financial instruments; he
or she performs investment research and makes recommendations to
institutional and retail investors to buy, sell, or hold. Most analysts
specialize in a single industry or business sector.
The highest point; the pointed end, tip, of a triangle
ASCENDING TREND CHANNEL
When prices trend between two parallel trendlines, this is referred to as a channel
A sideways price pattern between two converging trendlines in
which the lower line is rising while the upper line is flat. This is
generally a bullish pattern.
This is a debt, which cannot be recovered - thus forcing the
company to write it off against profits. Most companies make provision for
bad debts, a figure which is adjusted annually. When the economy is in
recession, such provisions will tend to be higher, especially among banks. A
provision for bad debts is a current liability.
Balance Of Payments
The combined net position on the capital and current accounts of
the country. The current account indicates whether South Africa is spending
more foreign currency on imports than it is receiving for its exports, while
the capital account shown how much money foreigners are investing in South
Balance Of trade
This forms part of the balance of payments calculation, but
refers only to the difference between the value of exports offset against
imports. While balance of trade will reflect the level of physical imports
relative to exports, the balance of payments reflects non-physical flows such
as capital and dividends to and from abroad, debt repayment and receipts,
interest payments and receipts (the so-called invisible items).
A list of all balances taken from a company's ledger after
incomes and expenses have been offset to arrive at a profit or loss. These
balances are combined in carefully prescribed ways. The objective of the
balance sheet is to give a snapshot of the company at a precise moment in
time. This shows where the company obtained its money (liabilities) and how
it has allocated that money (assets) so as to generate profits. Obviously,
the sources of money must be totally accounted for in assets of one sort or
another and therefore the "two sides" of the balance sheet must
Advertised minimum rate at which the South African Reserve Bank
will discount bills of a currency of fewer than 120 days.
A graphic representation of a stock or commodity in terms of price and / or volume.
A Fee determined by a broker for shares bought or sold on the
same day. This is additional to brokerage charges on the purchase and sale of
shares, where such basic charge is levied by the member firm concerned.
Broker deal accounting service provided by the JSE. The system
keeps the scrip records and books of individual broking firms in respect of
Describes a situation where the majority of shares are dropping
and the market is declining generally.
A long period of time when prices in the market are generally
declining. Bear markets generally consist of three phases. Distribution,
panic and discrouged or distressed selling.
Selling shares you do not possess in the expectation of being
able to buy them at a lower price before they are due for delivery.
Theoretically, the potential loss is limitless since the share price can rise
to any level.
A situation that occurs when prices break below a significant
level and generate a sell signal, but then reverse course and negate the sell
signal, thus 'trapping' the bears that acted on the signal with losses. A
bear trap is another form of whipsaw
A long downward trend in a share's price, a sector's index the
all-market index or other indicator.
Legal owner of stocks and shares and accompanying rights and
dividends even though the shares are not necessarily registered in his name.
These shares may also be held in a nominee. Beneficial ownership passes at
the time of purchase.
A distribution made by companies to holders of the securites in
the form of cash or securities, usually in proportion to their holding.
The price at which a buyer is prepared to buy a share.
This is the difference between the prices at which market makers
will buy and sell shares. For example, the market maker may offer to sell
Anglovaal at R90 and bid (to buy) the same share at R89. For smaller
companies the percentage difference between the bid and the offer price will
be greater than for larger companies.
Bill Of Exchange
Unconditional signed order in writing, addressed by one person
to another. It requires the addressee to pay on demand, or at a fixed or
determinable future time, a certain sum of money to a specified person, or to
his order, or to bearer.
Highly rated Black empowered company.
A large amount of stock sold as a single unit. This term is most
often used to describe a unit of 1000 shares or more.
Non-residents' funds, which are, blocked in terms of Exchange
Control regulations. These funds cannot be remitted to the country or in
which the owner resident, and may be used for the purchase of listed
Sharp market turns accompanied by extraordinary volume which
signals the final wave of the trend, followed by a reversal or period of
A very safe share that has a history of sound management and
steady dividends. Examples of such shares are Sasol, S.A. Breweries, First
National Bank, Pick 'n Pay. Investors buy these shares for security rather
than quick capital gains.
A well known, public company that is thought to be in good
financial shape and have sound fundamentals (profitability, earnings).
A term synonymous with scrip issue and capitalisation issue
which describes shares given without charge to existing shareholders in
proportion to the shares already held.
This is the value at which an asset appears in the books, or
accounts, of a company. Very often, book values are higher or lower than the
real values of the assets, and can be misleading when considering the balance
sheet. A good example of this is where a company buys land and records it in
its books at cost. Over the years, the land becomes much more valuable, but
no adjustment is made to the book value.
The theoretical measure of what a stock is worth based on the
value of the company's assets less the company's debt.
This describes a stage in the business cycle when economic
activity is increasing.
This is a term used by share market analysts to refer to a
company's long-term indebtedness. It excludes those current liabilities, but
which arise as the result of normal business practice.
The lowest point in a share's price cycle.
Edges of a pattern
A European term, for a stock market. For example, the Paris
Bourse, or the Frankfurt Bourse.
A term used by accountants to indicate that a company has
reached the point where it is not making a loss or a profit.
A technical term which indicates that a share price has moved
clearly up or down after a period of relative indecisiveness or stagnation. A
breakout is often a buy/sell signal, especially in Point and Figure charting.
Assessment of the remaining assets of a company on winding up
after all liabilities have been paid. Such assets are available for
distribution to shareholders of the company.
Price gap that forms on the completion of an important price
pattern. A breakaway gap usually signals the beginning of an important price
When a price of a security emerges from a previous trading
pattern. The new price 'breaks out' above the high (or below the low) trading
pattern lines. Breakouts are used by technical analysts to predict
substantial upside or downside movement.
This is a loan obtained by a company to tide it over a short
temporary cash flow problem.
Commission charged by a broker for the purchase or sale of shares.
Person who buys shares in the expectation that the market will
rise and he will be able to sell them at a higher price.
A long period of time when prices in the market are generally
increasing. Bull markets generally consist of three phases. Accumulation,
steady advance of prices and blow-off.
A situation that occurs when prices break above a significant
level and generate a buy signal, but suddenly reverse course and negate the
buy signal, thus 'trapping' the bulls that acted on the signal with losses. A
bull trap is another form of whipsaw
A long period of consistently rising share prices, or index
levels. Usually such trends last from 2 to 4 years.
Any precious metal (most commonly gold) which has not been
processed into jewelry, coins, or used for any other manufacture. It is
normally kept in bars known as ingots.
The overall upward - (peak) - downward - (trough) pattern that
is followed by business activity. There are a number of theories about the
causes of these cycles, but no real explanation for this. The share market
tends to anticipate major changes in the direction of the cycle by about 6
months. The cycle normally lasts about 3 to 5 years.
A day on which the Stock Exchange is open for business. This
would exclude Saturdays, Sundays or any holiday on which the Stock Exchange
is closed. It is also known as market day.
Price indicated by a buyer at which he is prepared to purchase
A high demand for a particular share or class of shares which
exceeds the supply and so causes the price to rise.
Right to purchase (call) specified shares within a specified
time (option period) at a specified price (striking price). By the payment of
a premium per share the investor buys the right to demand delivery of the
shares at any time during the running of the contract and at the strike price
when the call was purchased. (Useful when a sharp rise is anticipated, as the
only immediate capital required is the call money.)
A contract entitling the buyer to buy a fixed quantity of the
underlying asset at a stated exercise price.
An abbreviation for capital expenditure. It is often used when
referring to gold mines. It refers to expenditure, which is of a capital
nature - in other words used to purchase some sort of fixed asset.
Money which is used to supply "working" capital or to
purchase capital goods, which are to be used to generate the income of the
company. Capital can also include the reserves of undistributed profit
retained by the company. Share capital refers to the money raised as a result
of the sale of company shares. Working capital is used to buy stock and
Increase in capital value of a portfolio or a particular share
as a result of a rise in the market place.
A capital gain occurs when an investment is sold for more than
was paid for its purchase. A dividend is an income gain, or the natural
return on an investment. Capital appreciation occurs when shares or other
investments are at a higher market price than they were purchased. Until the
shares are sold, no capital gain has been realised.
Capital Gains Tax
A tax on profits realised from buying a security at one price
and selling it (or holding it to redemption and then redeeming it) at
See Capital appreciation
Return to shareholders of all or any portion of the issued capital
of a company on the winding up of operations; or the return of capital in
excess of a company's requirements.
a. As controlled by operation of law. These are amounts which
are by law required to be set aside and may not be utilised for purposes
other than those specifically provided for by the Companies Act, 1973, as
amended or by that company's articles of association. b. General.
Appropriation made from profits at the discretion of directors, to meet
future commitments of the company. Such appropriation, if subsequently found
to be excessive or unnecessary, may be added back to the balance of
unappropriated profits through the appropriation account.
This is the way in which a company has raised the capital needed
to establish and expand its business activities or, more specifically, the
number of shares and long-term loans in each class that have been authorised
and issued. Most Stock exchanges reference books describe the capital
structure of listed companies.
Free issue to shareholders of new fully paid shares by a company
from its reserves. If of the same class the shares will rank pari passu with
existing shares, and are sometimes called a bonus issue. Companies may issue
a capitalisation issue instead of dividends.
Annual net profits retained in a business, plus the depreciation
provision. The concept of cash flow is based on the fact that, although it is
a cost, the charging of depreciation does not in itself involve any cash outlay.
(The cash flow is useful in gauging a company's projected financial position
and its dividend potential.) Sometimes it may be necessary to calculate cash
flow on the basis of equity earnings plus the depreciation provision (i.e.
before deducting the cost of ordinary dividends). To distinguish between the
two concepts, they may be referred to as the 'gross cash flow' and the
'retained cash flow'.
This is a publicly advertised announcement made by a listed
company to urge shareholders to exercise caution when trading in its shares.
These announcements are advertised in the Business Day (and other leading
papers) and SENS whenever a company is involved in any activity (such as
negotiating a take-over) which should materially affect the price of the
shares. The idea is to protect investors from potential losses should the
share price alter appreciably in the short term.
Central Depository Limited, the South African central securities
depository registered under the Act.
A depository institution admitted by the CD as a participant in
terms of the Act, the CD Rules and the CD entry criteria.
Major regulatory bank in a nation's monetary system, generally
Central Securities Deposit
An institution established to hold equities, debt or both and to
effect transfers between accounts, typically by book-entry.
Unlike the Directors' Report this is not a legal requirement,
but has become customary, especially for listed companies. Normally, it
contains the policy of the company and its strategy for the coming year. This
often includes a picture or projection of what is expected in terms of growth
in the year ahead. It is interesting to look through the past projections of
a particular chairman to see how accurate they have been. This will give you
quite a good measure of his understanding of his company and industry.
When prices trend between two parallel trendlines, this is
referred to as a channel
A graphic representation of a stock or commodity in terms of
price and / or volume.
Price history of a share presented in the form of graphs, which
can be interpreted to indicate potential movements in the price. (The
charting of share prices, known as technical analysis, is considered by many
to be an important adjuct to fundamental investment analysis.)
A communications barrier between members or departments of a
financial institution to prevent the unauthorised transfer of price sensitive
information. Chinese walls are imaginary but are taken seriously in an
attempt to minimise conflicts of interest.
The process, in conjunction with settlement, of determining
accountability for the exchange of money and securities between counter
parties to a transaction. Clearing creates binding statements of obligation
for securities and/or funds.
Clearing And Settlement System
The system, which collects, processes and transmits the
information, which enables settlement. This includes information on trades,
scrip holdings, released scrip, funds commitment, CD transfers and SA Reserve
Bank settlement account entries.
Physical area where the clearing system of the JSE operates.
The computerised clearing system on the JSE which confirms deals
between brokers on a daily basis and prepares daily statements for the
purpose of settling these deals and entitlements.
Closing Date Of Offer
Last day on which an offer made by a company to its shareholders
may be accepted (eg. rights offer or offer to purchase a shareholder's share
in a take-over bid).
Last price of the day for a particular share. This could be a
bid, offer or sale price.
The last sale price of the trading session for a stock or
Another term for a symmetrical triangle
The amount charged by a brokerage house to execute a trade in a
stock or commodity
Basically these are raw materials such as gold, silver, soya
beans, sugar, coffee, steel etc. Many commodities are traded in markets
around the world. The gold price is determined in such markets, so they affect
any supplier of gold such as South Africa.
Any hold or gap in the chart occuring within an area pattern.
These type of gaps have no forecasting significance.
A term used in America to describe their equivalent of ordinary shares.
An offer made to the shareholders of a company conditional to
the occurrence of some event. Typically, where a take-over bid is being made,
the predator will make an offer to shareholders conditional to its being
accepted by more than 50% of the shareholders.
An electronic confirmation by a banker or a CD Participant
The sideways trading from which area patterns evolve.
These are usually very large, sometimes multinational, holding
companies involved in a wide variety of industries
Consolidation Of Shares
Consolidation of a company's shares into a lesser number of
greater nominal value.
Also called a continuation pattern. It is an area pattern which
breaks out in the direction of the previous trend
Contract note / Broker's note
Contract note (also called broker's note) which a broker is
required to send to a client recording the details of a purchase or sale of
shares including the commission payable, the basic charge, the uncertificated
securities tax (UST) as well as any other mandatory charges and the
settlement period date.
The price at which a bargain in any share was struck.
The market convention embodied in the rules of the JSE whereby a
client has a contractual obligation to cause a trade to be settled on
A client whose funds and uncertificated securities are under the
control of a Custody and settlement Member or Custody and Settlement Agent,
or whose settlements take place via the CSD participant of the member as if
the client's funds/sec were under the control of a CSM/A. The broking member
will either have a portfolio for this client or will manage the purchase and
sale of shares on the account of the client. Settlement of the trades will
take place through the boking member's CSDP.
The number of warrants that must be exercised in relation to one
share or an underlying parcel of shares.
Securities issued in one form with provisions allowing them to
be converted into securities in another form. For example, debt instruments
that can be converted into ordinary or preferred stock, subject to specified
Any action by an issuer of investments, or by another party in
relation to the issuer, affecting an investors entitlement to investments or
benefits relating to those investments. This includes, but is not restricted
to, takeovers, capital restructuring and related activities, rights issues,
stock conversions, scrip dividends and redemption's. Also known as
Entitlements and Benefit Distributions.
After an advance, a decline that does not penetrate the low from
which the advance began is known as a correction. Also referred to as a
retracement, a correction usually retraces 1/3 to 2/3 of the previous advance
The opposite party to a trade. Usually one party to a trade
refers to its trading partner as a 'counterpart'
Rate of interest payable on gilt-edged securities, or bonds.
Central Securities Depository
Central Securities Depository Participant
Market quotation, which includes participation in the current
If the payment of dividends on cumulative preference shares is
suspended they accumulate year by year and these arrears must be paid before
dividends on ordinary share are resumed. (Dividends on preference shares are
not cumulative unless specifically stated.)
Current assets ratio
Company's total current assets divided by total current
liabilities (e.g. if the total current assets are double the current
liabilities then the ratio is expressed as 2:1)
Current or liquid assets
Assets which may be turned into cash more readily than fixed
assets. These are usually stocks, debtors and cash in hand, and provide the
working capital of a company.
A depository institution, such as a central depository, bank or
JSE member firm which holds securities in safe custody on behalf of its
participants, members or clients.
The differnece between the high price and the low price during
one trading day.
The extent to which a share moves during the course of the
trading day on the Stock Exchange. You will find the day's move quoted as a
separate column in the better newspapers, both in cents and as a percentage.
In essence this shows the difference between one day's closing price and the
Money raised by a company through loans. Holders of debentures,
which are transferable, are creditors of the company with specific rights as
to repayment of capital and interest. Interest must be paid regularly,
whether or not there are sufficient profits: and if interest is not paid the
debenture holders enforce their rights by obtaining judgement against the
company or placing it in liquidation.
Debenture, convertible redeemable
Debenture embodying the right to convert, within a specified
time, all or a portion of the holding into ordinary shares at a stipulated
The ratio of shareholders' equity in the company (share capital
and reserves) to company borrowing of the company. The company has two
primary sources of capital: - shareholders equity (consisting of the money
raised when the shares they hold were issued, plus any profits which have not
been distributed as dividends); and money obtained in the form of loans from
banks and other lending institutions. The Debt/Equity ratio shows who owns
what in the business. For example if shareholders had only R1 for every R1.50
of the bank's then the company would be "highly geared" and in
danger of going beyond its credit worthiness. This means that the bank would
effectively control the company by being able to close it down by simply
calling in its loan.
Special category of share where the payment of dividends is
deferred (a) for a fixed period or (b) until total dividends on ordinary
shares reach a certain amount. (Such shares are issued by a company wanting
to raise additional capital for a project that may not become revenue
producing for some time.)
The opposite of inflation. A period where the purchasing power
of money increases in terms of a basket of goods and services.
Delivery versus Payment
The good delivery of securities in exchange for the
simultaneous, final and irrevocable payment of money.
A measure indicating the sensitivity of a warrant's price to
price movement in the underlying security. Call warrants have positive deltas
while put warrants have negative deltas.
The delta of the warrant represents the relative change in the
value of the warrant to changes in the value of the underlying share price.
Buying interest for a stock at a given price.
The elimination of certificates or documents of title which
represent ownership of securities, so that securities exist only as
Allowance for wear and tear on fixed assets, the declining value
of which affects the asset value of a company. This allowance is regarded as
a cost and in most cases is allowable as an expense in assessing a company's
A contract whose value is dependent on the performance of some
underlining asset or market indicator.
DESCENDING TREND CHANNEL
The area between the two parallel downsloping trendlines
comprising of the basic down trendline sloping across the reaction peaks of a
declineand the parallel downsloping trendline sloping across the lows of the
A sideways price pattern between two converging trendlines in
which the upper trendline is descending while the lower line is flat. This is
generally a bearish pattern.
Amount by which a newly listed security is quoted below the
offer price (opposite to premium). A share can also be said to stand at a
discount to net asset value when the market price is lower than the balance
sheet value per share.
An account opened with a stockbroker where the stockbroker may
trade on the client's behalf without consulting him. The opposite of a
An item on the balance sheet, which appears on the Capital
Employed (or liabilities) side. These are reserves, which may be distributed
to shareholders in the form of dividends because they have been built up out
of the profits of the company.
The period when farsighted investors senses that the market has
outrun its fundamentals and begin to unload their holdings at an increased
pace. Trading volume is still high, but diminishes on rallies.
When new highs (or lows) in one indicator are not realized in
another comparable indicator.
Spreading of a share portfolio over a variety of companies operating
in different fields. The opposite to putting all one's eggs in one basket.
This is to lower the risk of a portfolio.
Payment made to shareholders out of a company's profits after
taxation and prior charges have been met.
Dividend cover on preference shares
Earnings less tax and the interest of minority shareholders
divided by the annual cost of dividends on preference shares. (This shows the
degree of security of the preference dividends and also gives an indication
of the company's gearing.)
Dividend Equalisation Reserve
A distributable reserve, which is specifically set up to ensure
that dividends remain stable despite, changes in earnings. If a company
normally pays a dividend of 10 cents per share, the directors might establish
a dividend equalisation reserve so that this dividend level is protected
against unprofitable years.
Dividend per Share (DPS)
A company's ordinary dividend divided by the number of ordinary
shares in issue, usually expressed as a number of cents per share
Dividend Yield (DY)
Dividends per share expressed as a percentage of the current
market price. For example, if a company pays a dividend of R10 000 and it has
10 000 ordinary shares in issue (sold to the public) then the dividend per
share will be 100 cents. If the current market price is 2 000 cents per
share, then the dividend yield will be 5%. This shows that if you bought the
share at its current price, and it continued to pay the same dividend you
would receive a 5% return per annum.
A share of the profits - in cash or stock equivalent which is
paid to stockholders
A reversal chart pattern displaying two prominent troughs. The
reversal is complete when the resistance peak is broken.
A reversal chart pattern displaying two prominent peaks. The
reversal is complete when the support trough is broken.
Dow Jones Index
Various indices are compiled daily of the prices of securities
on the New York Stock Exchange. The Industrial Average measures changes in
the unweighted arithmetical average of thirty leading industrial shares.
There are similar indices for Utilities, Transportation, composite and Bond
DOW JONES INDUSTRIAL AVERAGE
A price-weighted average of 30 blue chip stocks published by Dow
Jones & Co. Because it is price-weighted, stocks with the highest prices
will have the most influence and those with the lowest, the least influence.
DOW JONES TRANSPORTATION AVERAGE
An index consisting of 20 stocks in the transportation business.
Originally the index only included railroads; now airlines and trucking
companies are included. According to the Dow Theory, a new major high in the
DJIA should be confirmed by a new major high in this index before it is
considered a reliable signal.
One of the oldest and most highly regarded technical theories. A
Dow Theory buy signal is given when the Dow Industrial and Dow Transportation
averages close above a prior rally peak. A sell signal is given when both
averages close below a prior reaction low.
Earnings Yield (EY)
Earnings per share expressed as a percentage of the current
market price of the share. For example, a company with 25 cents earnings per
share and a market price of 250 cents would have an earnings yield of 10%.
Equities Clearing House, which is the clearing house operated by
the JSE to facilitate the clearing and settlement of JSE trades.
Electronic Scrip Register
The electronic record which evidences the rights of owners to
securities in a dematerialised market.
The settlement of transactions by electronic means STRATE will
ensure that, all transactions on the JSE will be settled electronically.
That portion of share capital which carries risk, and shares in
profits through dividends that are dependent on profitability. Ordinary
shares are often called equity shares, and other types of shares, which carry
less risk as convertible or participating preference shares are known as
"near-equity". Equity is the share capital and reserves of the
company - which is the same as its net assets (net of liabilities). You
should be careful because in many instances, the book value of assets such as
stock and real estate is very different from the market value.
A generic term for derivatives involving stocks/shares - whether
in individual companies, baskets or indicies of such stocks/shares.
An option involving a stock/share, or a basket or index of
Equity share capital or equity shareholders' funds
Funds invested in a company plus the profits, which have been
A warrant that is only exercisable at expiry.
Market quotation, which excludes participation in the current
The generic term used to describe futures, options and other
derivative instruments traded on an organised exchange.
The act by which the buyer/holder of an option takes up his
rights to buy or sell the underlying instrument at the strike price.
The price at which the underlying asset will be bought or sold
if the holder exercises the warrant. Also called the strike price.
A price gap that occurs at the end of an important trend, and
signals that the trend is concluding.
Expiry, Expiration date, Maturity date
The date and time when a transaction matures. Most commonly used
to describe when the buyer/holder of an option ceases to have any rights
under the contract, or when a futures contract month ceases trading.
The degree to which a portfolio or other investment is
susceptible to risk from certain factors. For example, a share in a company
whose main business is importing would be highly "exposed" to the
Rand/Dollar exchange rate.
A situation that leads to the warrant lapsing prior to expiry.
In this situation Deutsche Bank will attempt to make a fair cash settlement
Any securities transaction that does not settle on contracted
settlement date because one of the settlement parties does not meet the
An area pattern with two downward slanting converging
trendlines. Volume diminishes as prices move toward the apex of the pattern.
A breakout which is confirmed but which quickly reverses and
eventually leads the stock or commodity to breakout in the opposite
A set of three secondary trendlines drawn from the same starting
high or low, which is spread out in the form of a fan.
The Fibonacci number sequence (1,2,3,5,8,13,21,34,55,89,144,...)
is constructed by adding the first two numbers to arrive at the third. The
ratio of any number to the next number is 61.8 percent, which is a popular
Fibonacci retracement number. The inverse of 61.8 percent is 38.2 percent,
also used as a Fibonacci retracement number. It is the ratio of the Fibonacci
sequence that is important and valuable, not the actual numbers in the
Fill or Kill
(FK) means the full order must be executed immediately or otherwise
The dividend paid when the directors know what the final profit
for the year will be. Added to the interim dividend, this gives the total
dividend for the year.
Financial Times Industrial Index
A share price index calculated hourly during business hours from
an unweighted average of thirty leading chips dealt in on the London Stock
Exchange. Until recently this index was the best known barometer for the
stock market but this has now been superseded by the Financial Times Share E
100 Share Index. (FTSE)
Items owned by a company, such as land, buildings, machinery and
These are investments, which give a set return, such as
preference shares, bonds, debentures and savings accounts.
Fixed interest-bearing securities
Securities, such as debentures or government, municipal or
statutory loans, which pay a fixed annual interest.
A continuation chart pattern that generally lasts less than
three weeks and resembles a parallelogram that slopes against the prevailing
trend. The flag represents a minor pause in a dynamic price trend.
A reserve of precious metals and foreign currencies kept by the
Also known as a transfer deed. When signed by a registered
shareholder, it allows for the transfer of ownership of securities.
Financial Services Board. The statutory body charged with the
regulation of financial services, excluding bankers.
The Financial Times Stock Exchange 100 stock index, a market cap
weighted index of stocks traded on the London Stock Exchange.
Assessment of the merits of a company based on analysis of its
past history present trading results, future prospects, strength of
management and general economic conditions in the field in which it operates.
The techniques of fundamental analysis may be contrasted with those of
technical analysis (or 'charting') which are devoted exclusively to
predicting price movements of shares or other tradable assets.
Information on a stock pertaining to the business of the company
and how it relates to earnings and dividends.
An agreement to buy/sell, a standard quantity of a specific
commodity or financial instrument, at a standard future date at a price
agreed between parties to the contract. Futures contracts are traded on
organised exchanges. e.g SAFEX (SA Futures Exchange)
The Group of Thirty, a private group of prominent financial
industry participants which in 1989 proposed nine standards for improving the
world securities industry's efficiency and reducing settlement risks.
Gaps form when opening price movements create a blank spot on
the chart. This occurs when the high of the day is below the low of the
previous day or when the low of the day is above the high of the previous
day. Gaps are especially significant when accompanied by an increase in
Gearing or leverage
Ratio of prior charges to equity capital. It may be computed on
either an income or a capital basis. High-income gearing results in the
attributable earnings of the equity capital fluctuating more violently than
the total profits. For example, if the profits are halved, the amount
available for ordinary shareholders may drop to a third of the former figure
because of the deduction of a fixed preference dividend charge. Similarly, if
assets fall by 10% the value of the equity might fall by 15%.
An offer made to all shareholders of a company for the purchase
of their shares. The purchase price could be in cash or in shares of a
predator company or a combination of both.
Gilt edged stocks 'Gilts'
Stocks issued by governments and government-sponsored bodies,
such as Escom and Iscor, and stock issued by leading municipalities. They pay
a fixed rate of interest. (The coupon)
A debt issued through the Treasury, public entities and
municipalities, with the principal and interest guaranteed by the government.
Also referred to as gilt-edged security or gilt-edged stock
Taking steps necessary to get a listing on the Stock Exchange.
Scrip which is acceptable to a company for registration. (It is
the selling broker's responsibility to see that the scrip he delivers
conforms to 'good delivery requirements.)
Stock paying a fixed rate of interest issued by a government or
municipality. Also known as 'gilts', or gilt-edged stock.
Environmentally friendly companies
The holding company of a number of subsidiaries. Such companies
produce Group Consolidated Accounts once per annum showing the consolidated
position and performance of all the subsidiaries.
Shares which are expected to pay increased dividends over the
years as a result of rising profits and an increase in market price.
A fund maintained by an exchange to recompense investors when a
member firm fails to meet its obligations
HEAD AND SHOULDERS BOTTOM
A well-known reversal pattern marked by three (or more)
prominent troughs with a middle trough (the head) that is lower than the
other troughs (the shoulders). When the trendline (neckline) connecting the
peaks at the top of the pattern is broken, the pattern is complete.
HEAD AND SHOULDERS TOP
A well-known reversal pattern marked by three (or more)
prominent peaks with a middle peak (the head) that is higher than the other
peaks (the shoulders). When the trendline (neckline) connecting the troughs
at the bottom of the pattern is broken, the pattern is complete.
Headline Earnings Per Share (HEPS)
Taxed profit less preference and minority shareholders'
interest, divided by the number of ordinary shares issued which is EPS. HEPS
excludes from this EPS figure profits or losses associated with the sale or
termination of discontinued operations, fixed assets or related businesses,
or from any permanent devaluation or write off of their values.
Action taken by a buyer or seller to protect his business or
assets against a change in prices.
Dealing in such a manner as to reduce risk by taking a position
that offsets an existing or anticipated exposure to a change in market
prices. You are therefore attempting to lock in the profit/loss on the
position at the current level.
This is the highest cash sale for a given period. This value is
adjusted after capital structure changes.
A series of past daily, weekly, or monthly market prices.
Any company, which owns more than 50% of the voting capital of
another company, or can be, said to have effective control over the
appointment of its directors.
When tops of the rallies and bottoms of the reactions form along
lines which are horizontal and parallel to one another.
In accounting terms, this refers to all revenues received by a
company, both as a result of its sales and other sources such as interest,
dividends or rent.
A weighted or unweighted average of the prices of a group of
shares. There are many types of 'indexes' (indices) for sectors, sub-sectors
and entire markets. There are also a number of ways to weight the data, but
essentially the idea is to allow for the fact that the market capitalisation
of shares differs widely within the same sector. This is partly because each
company has a different number of shares in issue. Over and above this,
shares leave the sector, and new ones join it. The calculation of indices is
the work of actuaries and this explains the term JSE "Actuaries"
Indices. Indices are useful for determining the general direction of a sector
and perhaps comparing individual shares with the group average. Sectors may
also be compared, and a careful study of index trends will allow you to move
your money around the market from one profitable sector to another.
A relatively small deposit - in comparison to the nominal value
of the contract - which both the buyer and seller must lodge with the
clearing house as security. In very volatile markets, the initial margin
required can vary several times during the course of a single day.
A day in which the daily price range is totally within the
previous day's daily price range.
The illegal dealing in shares by people who, because of their
privileged position, have information, which materially impacts on the value
of the shares, before that information has been made public. This type of
dealing is extremely difficult to control and is a constant feature of most
share markets, especially where special situations such as take-overs are
about to occur. The only protection is to keep a careful watch on the volume
traded, because massive volumes are an indication that someone knows
something that you don't
Individuals who possess information likely to affect the price
of a stock, but which is unavailable to the public.
An organisation (as opposed to an individual), that invests
funds arising from deposits, premiums etc. Examples are insurance companies,
mutual funds and investment trusts.
Non-physical items such as goodwill trademark patents, etc. In
computing a company's net worth the value at which any intangible item is
carried in the balance sheet is excluded.
The price of money. Money behaves in much the same way as a
commodity, in the sense that when it is in short supply, it becomes more
expensive and vice versa. The interest rate is the cost of borrowing it and
the reward for lending money. There are a variety of different interest
rates, which apply to different types of money. For example, the prime
overdraft rate is the rate at which the banks' most creditworthy clients
borrow on overdraft: the banker's acceptance rate, or BA. Rate, is the rate
at which the banks discount short-term paper over say 90 days and so on. The
size of the money supply is a primary determinant of the interest rate, and
also the point in the business cycle. A fall in interest rates is normally
seen as an indication of a pending upswing in the economy.
A dividend paid out by the company when the directors have
received the interim (half year) financial results. The final dividend is
paid when the final profits are shown in the final accounts.
Displays the earnings declared for the specified share either
during the current or previous financial year. The figures are adjusted for
any subsequent splits, consolidations or capitalisation issues that might
have taken place.
The intermediate trend or secondary trend refers to a trend
against the primary trend or major trend.
The perceived value of a natural object, e.g. a precious metal,
regardless of its actual price at any given time. In economics, value is
determined by demand and supply and is denoted by price.
Another word for stocks of raw material, work in progress,
consumable stores and finished goods. The valuation of inventory is critical
to the balance sheet.
Investment Holding Company
A Company which holds other companies as subsidiary or associate
Companies specialising in investing in shares. Their capital is
fixed and shares in investment trusts listed on an exchange are bought and
sold in the market like other shares. Also known as 'closed-end' trusts as
their capital is fixed.
Investor Protection Levy
This levy - which is 0.0003% of value of shares bought or sold
is used by the JSE to monitor transactions on the market to ensure that they
have not been conducted with insider information.
International Securities Identification Number designed by the
International Organisation of Standardisation (ISO) and advocated by G30.
A series of days that is usually formed after a sharp rally or
decline, which is seperated from the previous move by an exhaustion gap, and
a move in the opposite direction which follows by a breakaway gap
Issued share capital
Amount of share capital actually issued by a company.
Issued value = number of shares issued X par value
IT3(b) Income Tax form
The IT3(b) is a South African Revenue Service (SARS) Income Tax
form used for the return of income from investments, property, rights and
Joint venture between a local firm of stockbrokers and one of a
recognised stock exchange outside South Africa where arbitrage is conducted
for mutual profit.
Joint stock company
Company owned jointly by a number of shareowners. All companies
listed on the JSE are not only joint stock companies, with limited liability,
but are also public companies in that they have more than 50 shareholders.
The shares of a public joint stock company are readily transferable from one
person to another and can conveniently be marked on a stock exchange.
JSE Member Firm
A member firm of the JSE who may trade either as an agent or a
principal in any transaction - usually referred to as "stockbroking
JSE Rules and Directives
Rules, sets of rules and directives established by the JSE to
govern all the workings of the exchange in terms of the Stock Exchanges
Control Act (SECA), Act 1 of 1985
JSE Trustee (Pty) Ltd.
A company formed by the JSE to safeguard the surplus funds
belonging to a client and held by a broker who is operating a managed account
on behalf of the client.
Where a company is wound up for financial reasons, it is
sometimes the case that it could have been saved had it been managed well.
Judicial management was introduced to assist this type of company to overcome
a temporary setback without going out of business. A judicial management
order usually gives the company a moratorium on its debts. Essentially, the
court replaces the directors. A provisional judicial manager is appointed, to
assume control until the final judicial manager can be appointed. Application
for judicial management may be made by the company itself, a creditor or a
member. If the judicial manager cannot return the company to solvency, then
he may recommend to the court that it is wound up.
Last Day To Register
Date by which securities must be lodged with the company's
office to qualify for dividends rights or other corporate actions.
Last Transaction Price (Last trade)
The price at which a certain share was last traded. This
information is normally reported on the price page of your newspaper in a
column headed "last". It is sometimes called the
"closing" or "ruling" price. Normally, papers report on
the position at the end of the morning or afternoon session.
These are indicators, which tend to anticipate movements in
other indicators. For example, the paper and packaging industry tends to
start experiencing better conditions before the rest of the economy because
almost all products have to be packaged before they can be sold.
Limitation by a company's memorandum of a member's
(shareholder's liability to the amount, if any, unpaid on shares held by him
(Section 5 Companies Act). The principle of limited liability is essential to
the formation of a joint stock company.
An order, which may only be effected at prices equal to or better
than the price on the order.
Price charts that connect the closing prices of a given market
over a span of time that form a curving line on the chart.
The Process whereby a company is dissolved. The court, the
company itself, a shareholder, the Master the court, the judicial manager, a
creditor, or the minister may initiate such dissolution. A liquidator is
appointed, who arranges to sell off all the assets of the company and uses
the proceeds to pay its creditors (firstly the secured creditors and then the
unsecured ones). Once the creditors have been paid then the preferential
shareholders are paid, and then finally the ordinary shareholders.
The ability of a company (or person) to raise cash on short
notice, usually with a view to meeting debts, unexpected expenses, or to take
advantage of opportunities. It is wise to keep a portion of your wealth in
cash so that you will be able to take advantage of unforeseen opportunities
(or meet unforeseen expenses) without being forced to sell shares at a time,
which may not be advantageous. Excessive liquidity usually means that the
company or individual is overly conservative and is not reaping the full
benefit of investment opportunities
The ease with which a stock may be bought or sold in volume on
the marketplace without causing dramatic price fluctuations. A highly liquid
stock is characterized by a large volume of trading and a large pool of
interested buyers and sellers.
Official granting of a quotation of a company's shares on the
JSE. (A listing is granted when a company has fulfilled the Exchange's rules
and requirements for listing.)
Branch of the JSE administration responsible for the
administration of the JSE's listing requirements, both as they affect new
listings and existing listed companies.
Local Counter-Party Transaction
A transaction where a member firm trades as a principal with a
person, other than a member firm in South Africa.
The result of a trader having bought more than he has sold in
any particular market/commodity/instrument/contract.
A debt, which is to be, repaid over years rather than months. A
good example of this would be debentures, which carry a fixed percentage,
return and are redeemable by the company at some future date. Long-term
Liabilities are found on the liabilities side of the balance sheet
immediately below share capital and reserves.
An indicator developed by Gerald Appel that is calculated by subtracting
the 26-period moving average of a given security from its 12-period moving
average. MACD displays trend following characteristics by comparing the
moving averages, and by plotting the difference of the moving averages as an
oscillator, MACD displays momentum characteristics.
Main Board Listing
For companies with, among other things, a share capital of not
less than R25million and an audited profit level of at least R 8 million
before taxation at the time of listing.
Major trend refers to a trend which lasts at least one year.
The acquisition of all or part of the share capital of a company
by its directors and senior executives. The management is usually assisted by
loans from an institution.
A term usually applied to gold-mining companies with a very high
cost of extraction and therefore a low margin. If their cost of extraction is
close to the gold price, then very small fluctuations in the gold price can
easily double or halve their profitability. This is reflected directly in
their share price, which tends to fluctuate widely for relatively small
changes in the gold price.
Mark to Market
Calculation of the difference between the contract price and the
The difference between what was paid for a share and its current
market price. This is distinct from the realised profit, which can only occur
if the share is actually sold and the money is in the bank.
The extent or scope of change in stock prices. Market breadth is
most often measured by analysing the number of stocks that advanced or
declined during the period or by counting the number of shares in issue by
their current market price.
The top 5 bids to purchase a share and the top 5 offers to sell
a share in the market is known as market depth. The bids are listed by
highest bid first with the corresponding quantity and the number of orders
that make up that quantity for the bid. The offer are listed by lowest offer
first with the corresponding quantity and the number of orders that make up
that quantity for the offer. When a bid and offer are at the same price then
a trade occurs.
An order given to a broker with no price limitation. The broker
is instructed to obtain or sell a specific number of shares "at
market" - as opposed to a limit order, where the instruction is only
valid above or below a pre-determined price.
Ruling price of shares on the Jet System.
Attribute acquired by a share when it is dealt in regularly and
can thus be bought and sold easily.
The purchase leg of a deal will be matched when the
corresponding sales leg is reported to the computer, if these are equal in
every respect, and vice versa. A matched deal is a confirmed deal.
The date when a transaction is due to end, or the period of time
until that date is reached.
A gap that frequently occurs at just about the halfway point of
the current move.
Memorandum of association
Document required by law for the constitution of a company. It
must state the principal object of the company.
(Also called an amalgamation.) This occurs where two or more
companies come under the control of one, whose shareholders then become the
shareholders of the companies that were merged. Sometimes one of the two
merged companies is used as a vehicle for the merger, and sometimes a totally
new company is formed for this purpose. A merger is seen as distinct from a
"take-over" or an "absorption".
These are the day-to-day fluctions of prices, usually less than
six days and seldom longer than three weeks.
Shareholders who, individually or collectively, own fewer shares
than the controlling group.
A leading indicator measuring a security's rate-of-change. The
ongoing plot forms an oscillator that moves above and below 0. Bullish and
bearish interpretations are found by looking for divergences, centerline
crossovers and extreme readings.
Monetary policy is the control of the economy by changes in the
money supply, as a result of changes in the level of interest rates, and the
percentage of money that banks are required to lodge with the Reserve Bank.
This is as opposed to fiscal policy, which involves the level of government
spending and taxation.
The money market does not take place at a central place; it is
really a communications network which allows banks, money brokers, businesses,
discount houses, the government and the Reserve Bank to deal with one another
and arrange short term lines of credit with one another. Money brokers and
discount houses conduct the market in a full time capacity, and in fact
constitute the market.
Money market account
Standard Bank Online Share Trading offers you an alternative to
holding cash in your trading account (held with the JSE Trustees Pty Ltd
otherwise known as "JSET"). This can be done by opening a Money
Account with Andisa Securities. Interest earned on cash in your trading
account is calculated on the average daily call rate obtained by the JSE
Trustees. However for a Money Account, we have a call account with Standard
Bank into which we place your funds, at better net rates. Note that the rate
obtained on a Money Account is a daily call rate that may change without
notification. Money Account holders will receive comprehensive details of all
movements of funds, interest earned, rates obtained and fees deducted on
their monthly Andisa Securities statement. The JSE requires all clients to
maintain an account with JSET to ensure settlement of trades within specified
times. We will automatically transfer funds from your Money Account to your
JSET account to meet settlement obligations i.e. you will notice no
difference to your trading account other than earning higher interest from
Standard Bank on your cash balance. There is a payment fee of R4.56
(including VAT) for withdrawals made from either a Money Account or a share
trading account to your bank account. There are no extra fees or charges
above the standard fee for a trading account for a Money Account.
The total amount of money in the country. There are various
methods for measuring the money supply, itemised under "M1, M2 and
The situation where one business controls enough of the supply
of a product or service to be able to force the price up by being the only
supplier. A good example of this is De Beers, which has a virtual monopoly in
the diamond market. Monopolies are discouraged in most western capitalist
countries because they tend to lead to artificially high prices and inferior
products. In the USA anti-trust legislation attempts to prevent monopolistic
mergers and take-overs.
A fixing of the gold price in London at a fixing session. This
is done by five leading bullion houses, by matching supply and demand to
equilise at a certain price. There is also an afternoon fix.
Acknowledgement for money lent to a company against security of
property, bearing a fixed rate of interest and with no concern in the profits
or losses of that company.
The most commonly used technical indicator in the world; this is
often used in conjunction with other indicators. To calculate a moving
average on a data stream (such as a series of daily share prices), it is
necessary first to decide on its period. The shorter the period the more
sensitive the signals.
An average of data for a certain number of time periods. It
'moves' because for each calculation, we use the latest x number of time
periods' data. By definition, a moving average lags the market.
Mutual funds or unit trusts
Companies specialising in the investment of funds. The public is
invited to subscribe for units in the fund at a precise price, which is a
true fraction of the value of all the investments held by the fund. The price
of units is related to the market price of the underlying securities. Because
their capital is not fixed they are known as 'open-end trusts'.
National Association of Securities Dealers Automated Quotations
In a head and shoulders pattern it is a line drawn across the
two reaction lows (top), or two reaction highs (bottom) which occur before
and after the head.
When two or more averages, indicies or indicators fail to show
Net Current Assets
A balance sheet item showing the difference between current
assets and current liabilities. In most healthy companies, this difference
will be positive, so that the company is always able to meet its short-term
creditors from its short-term assets.
Net earnings per share after tax (EPS)
Taxed profit less preference and minority shareholders'
interest, divided by the number of ordinary shares issued.
Also referred to as NET PROFIT or NET EARNINGS.) The earnings of
an organisation after deducting taxation and all other expenses. This is
obviously an important measure of a company's performance, but you should
remember to allow for the inflation rate when comparing one year's net income
Net Net asset value per share
Value per share arrived at by dividing the net assets of a
company, after deduction of all prior charges, by the number of ordinary
shares issued. This figure is normally adjusted for the premium or discount
of the market value of investments on their book value. (Its two main uses
are to assess the price at which the shares of an investment company should
stand having regard to the market value of its underlying assets, and to
assess a possible price at which a take-over bid for the shares may be
Net Operating income
The profit of the company before the appropriations detailed in
the income statement. Most income statements begin with a statement of the
company's turnover, which is not arithmetically related to the rest of the
income statement. The next figure is net operating income from which the
interest paid extraordinary items, taxation, transfer to reserve, preference
and ordinary dividends are subtracted to arrive at the retained income for
Initial issue of shares in a company by a public offer, a
private placing, a tender bid or an exchange of shares for those of one or
more other companies.
Nil Paid Letters
A security which is temporarily listed on the stock exchange and
which represents the right to take up the shares of a certain company at a
certain price and on a certain date. Nil paid letters are the result of a
rights issue to the existing shareholders (or debenture holders) of a
company. A rights issue is one way of raising additional capital by offering
existing shareholders the opportunity to take up more shares in the company -
usually at a price well below the market price of the shares. These rights
are represented by the "nil paid letter" and are renounceable -
this means that they may be bought and sold on the stock exchange. You will
see them from time to time on your price page. They are normally very
volatile because they fluctuate according to how close the market price is to
the "take-up" price.
Nominal or par value of shares
Value given to shares when they are created. It has nothing to
do with the true value of shares and need bear no relationship to the market
A company formed for the specific purpose of registering
securities in its own name on behalf of other persons, and administering
A client who appoints his own CSD participant. Non-Controlled
Clients also known as a Del-pay Client in paper settled securities. These
type of clients are mostly Institutional. The broking member has no input as
to what this client buys and sells. The securities and funds are also not
under the control of the broking member and the settlement of trades takes
place via the clients CSDP. Risk managed with this type of client is a high
That portion of accumulated shareholders' equity, which may not
be distributed in the form of dividends. The Companies Act is at considerable
pains to maintain the share capital (or asset base) of a company and to
prevent minority shareholders from being defrauded by the majority. Because
of this, the shareholders' equity is clearly divided into two main areas -
contributed (or paid-in) equity and accumulated equity.
Non-resident share-holder's tax
Tax deducted by the company on behalf of the government from
dividends paid to non-resident shareholders.
Shares without voting rights. The issue of such shares is no
longer permitted by the JSE, though existing non-voting shares are allowed to
retain their listing. (N-shares).
Notes to the Accounts
These form part of the annual financial statements of a company.
They supply more information on the figures contained in the financial
accounts, according to the requirements of the Companies Act. It is very
important to consider these notes carefully before buying the shares of the
company. They often contain important information, which the company has
preferred to show as a note rather than in the balance sheet, income
statement or flow of funds statements. For example, any change in accounting
policies is contained in the first note, and these can be very important to
the final profit or loss picture. Other items, which are covered, is a
breakdown of investments into listed and unlisted, director's emoluments, a
breakdown of fixed assets, auditors' fees, details of borrowings and so on.
OBV (On Balance Volume)
The calculation is an accumulated running total of the of volume
calculated from the following explanation. If the stock's share price closes
above the previous day's or periods close, then all the volume traded during
that period is added to the total OBV. If the stock's share price closes
below the previous periods close, then all the volume traded in that period
is subtracted from the total OBV.
The total number of purchased or sold lots in a particular type
of exchange traded contract that have not yet been offset, i.e. sold off or
An order still pending or on the books to buy or sell security,
but not yet executed. An open order will remain in effect until it is either
executed or cancelled or for a period of two weeks, at which point it lapses.
If orders are required to remain open for more than two weeks, they can be
placed "GTC" (good till cancelled).
Nett total of open transactions and unsettled items with the
Purchased options giving the right of conversion into shares at
a fixed price and by a specified date. Options are negotiable on the JSE.
A commitment to buy or sell a specified quantity of a security
at a set price (limit), or at best, subject to certain terms.
Ordinary Share Capital
Capital of a company represented by the number of its ordinary
Also sometimes called "equity" shares, these are fixed
shares, which share in the profits and risks of the company. Unlike the fixed
dividend paid to preference shareholders, the ordinary dividend is decided by
the directors, and is dependent on the company's profits. If the company is
liquidated, the ordinary shareholders share out the proceeds after the
creditors and preferential shareholders have been paid out. For these
reasons, ordinary share prices tend to be far more volatile than preference
shares, giving opportunities for capital gains. Most of the shares published
in the newspaper are ordinary shares.
An indicator that determines when a market is in an overbought
or oversold condition. When the oscillator reaches an upper extreme, the
market is overbought. When the oscillator line reaches a lower exteme, the
market is oversold.
Over-the-counter market - a market which is normally not
licensed or an informal market for the trading of securities. There is
therefore no formal settlement through a clearinghouse nor is risk formally
This occurs where the applications for a new issue of shares
exceed the number of shares available for issue. This often happens because
the shares are offered to the public at a price below their inherent value
and people obtaining the shares can make an immediate "stagging"
profit when the shares are listed
A technical condition that occurs when prices are considered too
high and susceptible to a decline.
OVERBOUGHT / OVERSOLD INDICATOR
An indicator that attempts to define when prices have moved too
far and too quickly in either direction.
A technical condition that occurs when prices are considered too
low and ripe for a rally.
The second phase of a bear market, when buyers thin out and
sellers become more urgent. The downtrend of prices suddenly accelerates into
an almost vertical drop, while volume rises to climactic proportions.
The difference between the purchase price of a share and its
current market price. Another term for this is "market
appreciation". There is a potential danger in this figure, because it
may not be possible to sell the shares at their market price.
The price for which a share was first sold to the public.
Normally, the market price quickly exceeds the par value as the company grows
and make profits. The objective of the par value is to enable the "asset
base" of the company to be clearly established at its inception so that
no illegal erosion of that base can take place.
Bonds or equities on which the holder has paid only part of the
face value at the time of issue and is due to pay the balance in one or more
instalments, usually but not always at set dates and in set amounts.
Passing a dividend
Failure of a company to declare a dividend.
The breaking of a boundary line, tredline, or support and
A continuation chart pattern that is simliar to the flag, except
that it is more horizontal and resembles a small symmetrical triangle. Like
the flag, the pennant usually lasts from one to three weeks and is typically
followed by a resumption of the prior trend.
Shares, which trade for, low prices per share. They may be
shares of a very good company, however, they are usually not. They are
attractive to private investors who do not have enough capital to purchase
more expensive shares.
Percentage of profit to shareholders' funds
After-tax profit of a company expressed as a percentage of the
total shareholders' funds
POINT AND FIGURE CHARTING
A type of chart consisting of columns of X's (showing rising
prices) and O's (showing falling prices) arranged on a square grid. When the
index increases, a rising column of black X's is created -- a rally. When the
index falls, a descending column of red O's appears -- a decline.
Risk which is political, rather than economic, financial or
managerial. This kind of risk is very difficult to determine and can cause
tremendous fluctuations in the market.
All the securities owned by an investor.
This is someone who manages portfolios on behalf of investors.
He makes the investment decisions and is not usually obliged to get his
clients' permission to change their investments. He is paid a fee and
sometimes a percentage of any profit he makes, and is not liable for any
losses sustained by his clients.
The percentage breakdown of a portfolio over the various market
Schedule which Broking firms issue periodically (on request) to
clients detailing the purchase and current prices of their share investments,
the annual dividend, the yield, etc.; and comparing the overall situation
with the previous valuation.
A style of trading characterized by holding open positions for
an extended period of time.
Statement giving full initial information on the affairs of a
company seeking a listing on the JSE.
Shares bearing a fixed annual rate of dividend with a prior
right over all ordinary shares in the distribution of dividends from annual
profits; and a prior claim to repayment of capital on a winding-up of the
company. Unless such shares are specifically defined as non-cumulative the
company is liable for any arrears of preference dividends.
A general term used to describe the difference between the price
at which a share was first issued and the current price. Often, a successful
company wants to issue additional shares to raise the capital for expansion.
The price of these new shares will reflect the growth of the company since
its incorporation and so they will be sold for more than the selling price of
shares of the same class when the company was first formed. The additional
amount is a share premium, and is shown separately in a share premium
Price earnings ratio (PE or P/E)
The market price of a share divided by its earnings. It
expresses the number of years' earnings (at the current rate) which a buyer
is prepared to pay for a share. If the earnings per share are 10 cents and
the price 100 cents, then the price earnings ration is 10:1. The ratio is, in
fact, the reciprocal of the earnings yield. This ratio is also referred to as
the PE ratio, the P/E ratio and the multiple.
Lists of all buyers, sellers and sales prices issued by the JSE
at specific times during the day. These constitute the official records of
The difference between the highest and lowest prices at which a
particular share has traded over a certain time period - such as one trading
day, or one year. The range is a good indication of the volatility of the
The market for shares when they are first sold by a company to
raise capital. New issues and rights issues are examples of activity on the
primary market. Once the company has sold the shares, they enter the
secondary market and are sold and bought by members of the public without in
any way changing the capital structure of the company.
see major trend
Company which may not have more than 50 shareholders and which
restricts the right to transfer its shares.
Shares in a new issue placed by private arrangement with clients
by the sponsoring Broker and the merchant bank concerned with the issue. (The
sponsoring broker must make available to other Broking firms 30 percent of
his allocation of shares.)
One that has passed the development stages and is producing and
A stop order which follows the market up or down.
Any document, notice, circular, advertisement or other
invitation offering to the public for subscription or purchase of any shares
or debentures in a company. The prospectus must contain certain information
specified in the Companies Act. A prospectus must also be issued in the case
of a rights issue.
A stop order used to protect gains or limit losses in an
An item on the balance sheet that falls under liabilities. A
provision is "raised" when the company has an expense for which it
has not yet received an invoice and therefore does not know the amount. The
provision is an estimate, which is charged against profits because the
expense was incurred in the accounting period, which is being reported
A document, which entitles one person to attend shareholders'
meetings, speak and vote on behalf of another person who is a shareholder of
Acting or speaking for an absent shareholder on issues
surrounding the management of the company at shareholders' meetings.
Limited liability company, which is not a private company.
Offer made by a company to the public to subscribe to its issue
of shares. The offer must be made by way of a prospectus to which a form of
application is attached.
Return of prices to the trendline after a breakout.
Purchases on margin
Shares bought but not fully paid in cash, with the purchaser
making use of the credit facilities offered by some brokers.
Right of a seller, upon cash payment of premium money to the
buyer, to deliver all or any part of such transaction within a stated period
at an agreed price.
Company where the major asset consists of the legal control.
(I.e. 50% of the issued shares) of a company already listed. (Such a pyramid
will not be considered for a listing unless the original company has been
listed on the JSE for at least three years.)
A temporary upturn in the price of a share or index or other
data stream which occurs during an overall bear trend. The opposite of a
An increase in price which retraces part of the previous price
The relationship between two figures from the financial
statements designed to show the profitability or effectiveness of the
management within a company. Ratios have no absolute significance, and are
only relevant for comparisons over the history of the company or between
companies in the same sector.
A decline in price which retraces part of the previous price
A profit which is actually in the bank, as opposed to a market
appreciation. If you buy shares for R10 and they rise to R12 then you have a
market appreciation of R2. Only if you then sell them at R12 will you have a
realised profit of R2 less your dealing costs.
A downturn in the economy.
A continuation chart pattern where prices move sideways between
two different levels for a period of time and then continue moving in the
direction of the previous trend.
Shares which can be redeemed by the company either at fixed
dates and prices, or on certain specified terms at the discretion of the
Date on which debentures, notes and government, municipal and
statutory authority stocks are repaid.
Reduction of capital
Capital of a company can be reduced because (1) it has
considerable funds in excess of requirements; or (2) has sustained
substantial losses, which are unlikely to be recouped. In the case of (1) the
funds are paid out to shareholders and the par value of the shares is
reduced. (Mining companies approaching the end of their working lives usually
reduce their capital in this way.) In the case of (2) the losses are written
off by reducing the par value of the shares without any payment being made to
shareholders. Such capital reduction requires the consent of the courts.
The party registered as the owner in the Register of Members.
This may be the true owner, a fund, unit trust or nominee.
Entry in a company's register of the names and addresses of all
beneficial shareholders who have lodged shares for this purpose. Thereafter a
shareholder may receive a share certificate made out in his name and receives
all circulars, reports and dividends issued by the company.
A figure from the liabilities side of the balance sheet, which
is money ploughed back into the business out of profits, arising from a
revaluation of assets, or money set aside for the redemption of debentures or
other long-term loans. Reserves can be either distributable or
non-distributable in the form of dividends. The general rule is that a
company may only distribute profits, and not its capital base. Reserves
arising from profits are normally distributable, as opposed to reserves
arising from, e.g., a revaluation of land.
Resistance is a price level at which there is a large enough
supply of a stock available to cause a halt in an upward trend and turn the
trend down. Resistance levels indicate the price at which most investors feel
that prices will move lower.
Individual investors who generally deal in smaller amounts than
the professional or institutional investors.
The entire after-tax profit of a company is seldom distributed
to shareholders as a dividend. A portion is usually kept in the business to
finance future growth or to act as a reserve against less profitable years.
This is known as retained income and appears in both the income statement and
the balance sheet.
The peaks or levels where advancing prices are halted. This
represents a price level or area over the chart where selling pressure or
supply overcomes buying pressure or demand As a result a price advance is
halted and prices turn down again.
The return on an investment consists of any dividend, interest,
rent or other income added to the increase in the value of the asset over a
set period, usually expressed as an annualised percentage of the original
investment. For example, if you bought shares for 100 cents, received a
dividend of 25 cents and then sold them 6 months after the date of purchase
for 1175 cents, then your return consists of 25 cents dividend, plus 175 of
capital growth, which is 20% of your original investment of 1000 cents. This
is 40% on an annualised basis.
Return on Capital Employed
A ratio used to measure pre-tax profitability. It may be
calculated as pre-tax profit plus interest paid, divided by total
Appropriations made from profits to meet commitment expected to
arise in the future. These, if not required, may be added back to profits
earned (unappropriated profits) in subsequent years.
A chart pattern that occurs before an existing trend reverses
Injection of assets into a company greater then its existing
resources, in exchange for new shares, thus placing the control in the hands
of the vendor of such assets.
Reverse yield gap
A situation where the yield on equities is lower than that on
bonds. Traditionally yields on equities used to be higher than on bonds and
the differential was referred to as the 'yield gap'.
Issue by a company of rights to existing shareholders to take up
further shares at a specified price. Such rights, under the title of letter
of rights, may be sold in the market during a prescribed period if the
shareholder does not wish to take up his entitlement.
The probability that a share price will go down rather than up.
All investments have an element of risk which is harder to quantify than
their return, and therefore very often left to "gut feel".
Generally, the rule is that the more risky an investment, the higher its
potential return. To understand this, it is necessary to consider what you
are actually doing when you buy a share or other investment. Essentially you
are in the business of forecasting. You are saying that you are buying the
particular share because you believe that its price will go up.
The science of assessing and controlling risks in order to keep
them within acceptable bounds.
Also known as a saucer bottom, it is a reversal chart pattern
representing a long consolidation period that turns from a bearish bias to a
The ruling price at any time is the last recorded sales price .
The safe keeping of the deposited securities by a custodian.
Southern African Financial Instruments Real Time Electronic
South African Reserve Bank.
The Satrix40 is an instrument introduced by the JSE to track the
performance of the underlying Index (Namely the ALSI).
South African Transfer Secretaries Association
An award of Capitalisation shares where the shareholder will
always have the election for cash.
Instructions calculated by the computer showing the receiver and
deliverer of each item.
The right which confers membership of Safex on the registered
holder or lessee thereof
The market is made up of share transactions, which do not
involve the company that issued the shares concerned. The primary market is
where companies sell their shares to the public to raise capital.
A share of a company, which is well managed and has good
markets, but does not have the financial muscle or history of profits of the
blue chips. These are sometimes referred to as "growth" stocks,
because they have the potential to become blue chips at some future stage. You
should expect a secondary share to double its market price within the next 2
to 3 years, and for this reason they form an important middle area in your
portfolio between blue chips and speculative shares.
see intermediate trend
A grouping of all shares in the same industry usually
represented by a sector index.
Stocks, shares or bonds.
Securities Transfer Tax
The Securities Transfer Tax Act, 2007 (Act No. 25 of 2007) ,
provides for the payment of Securities Transfer Tax (STT) on the issue and on
the transfer of beneficial ownership of securities which are listed on the
JSE Securities Exchange (excluding debentures). The rate of tax is 0,25% of
the issue price or selling price of the securities. In addition, Securities Transfer
Tax is not payable in respect of the buy-back of its own shares by a listed
Securities, fixed interest bearing
Securities on which a fixed rate of interest is paid each year.
An account that separately identifies an investor's securities
and does not depend entirely on records maintained by the investor's
custodian or service providers
Price at which a dealer is prepared to sell shares on the
A period of extraordinary volume which comes at the end of a
rapid and comprehensive decline which exhausts the margin reserves of many
speculators or patience of investors.
Selling shares you do not possess in the expectation of being
able to buy them at a lower price before they are due for delivery.
Theoretically, the potential loss is limitless since the share price can rise
to any level. (By law, all bear sales have to be disclosed as such, a scrip
borrowing agreement needs to be in place.
The mood of the market. The way that investors as a group
perceive a share sector or the market as a whole - are they bullish or
In the STRATE environment, where all deals are settled
electronically, the settlement date is 5 days after the trade has taken place.
A situation where many scared investors exit their positions due
to unfavorable news or uncertainty regarding the stock or industry. The
dot-com bust was characterized by numerous shakeouts causing many to abandon
their dot-com positions, often at great losses.
Capital of a company represented by different kinds of shares.
Document issued to a shareholder by a company certifying
ownership of a stipulated part of the assets of the company.
A unique code will be assigned to each listed security. The code
will be up to 6 characters in length.
Increase in the number of authorised and issued shares in a
company without an increase in the capital. The number of shares held by each
investor increases in direct proportion to the overall increase in the issued
share capital without any change in the total nominal value. (Share splits
usually take place when a company's shares reach a price level that puts them
beyond the reach of the average investor.)
Share Transactions Totally Electronic (STRATE)
An electronic settlement system for the South African equities
The result of a trader having sold more than he has bought in
any particular market/commodity/instrument/contract.
Slight, continuing up and down movements in share prices, with
no definite trend evident
Transaction which is beyond the capacity of the market at the
Broking member of the JSE who must be nominated by a company
seeking a listing to act as a liaison between the company and the listings
department or committee.
Spot (or cash market)
A transaction involving immediate settlement, or the soonest
standard settlement in that market. For example, the spot date in the foreign
exchange market, is normally two business days after the date of the deal.
Person who applies for shares in a new company with the object
of selling them immediately dealings commence (hopefully at a profit).
Person who has held shares longer than anticipated because they
have not reached the price at which he hoped to sell.
A tax paid by the transferee on registration of shares in
his/her name. No stamp duty is payable if MST has been paid.
Licenced market for the buying and selling of listed securities.
Stock Exchange Licence
Licence issued by the government to an institution which
operates for the sole purpose of marketing securities in public companies. It
must be renewed annually.
Stock Exchange News Service (SENS)
The Stock Exchange News Service (SENS) is a service provided by
the JSE Securities Exchange. It is news items as released by JSE listed
companies that may affect those companies share prices. News items include
cautionary announcements, financial results, director dealings and trading
Stock Exchanges Control Act 1 of 1985 (as amended)
South African Act of Parliament that defines the conditions
under which a stock exchange must operate. The Act is administered through
the Financial Services' Board statutory body.
Ordinary share capital can be divided either into units of stock
or into shares. The terms in this context are synonymous.
Stocks and shares
Capital of a company. There are two main types of shares or
stock: those with a fixed dividend (preference shares) and those with a
fluctuating dividend (ordinary shares, or equities).
Stop losses are used to protect wealth by automatically placing
a sell order for your shares when the price of your share drops below a
threshold set by you. There are two types of stop losses.
Fixed price stop loss - Creates a sell order - on your behalf - when a
fixed price level is crossed by the current ruling price.
Trailing Price stop loss - Creates a sell order - on your behalf - when
a variable price level is crossed by the current ruling price. The variable
price level trails the high of the share's ruling price by a fixed amount or
Straight Through Processing
Price at which the security under option will change hands
should the option be exercised, with particular reference to 'call' and 'put'
Also known as a share split, a sub division involves an increase
in the number of shares held by each member, with a proportionate reduction
in their value so that there is no change in the total value of the
shareholding. Breaking each share down into smaller pieces does this. The
effect is to bring the shares within reach of smaller investors. This
normally results in a greater demand for the shares.
A company at least 30% of whose issued shares is held directly
or indirectly by a holding company.
Amount of stock available at a given price
The troughs or levels where declining prices are halted. This
represents a price level or area under the chart where buying pressure or
demand overcomes selling pressure or supply. As a result a price decline is
halted and prices turn up again.
A share that the Committee has suspended from trading for period
of the time. Usually, this occurs where some material event is about to occur
which will drastically effect the share price. Until this information is made
public, trading is suspended to prevent insiders from buying or selling the
A sideways chart pattern between two converging trendlines in
which the upper trendline is declining and the lower trendline is rising.
This pattern represents an even balance between buyers and sellers, although
the prior trend is usually resumed. The breakout through either trendline
signals the direction of the price trend.
This is a fashionable word to denote gains made in addition to
the sum total of the parts when two business concerns are jointed. The basis
of the concept is the experience that in some mergers the net advantages that
accrue to one firm need not come at the expense of the other: both parties
Scrip which has been tampered with, thus misrepresenting genuine
proof of ownership.
Holder of Rights Offer letters/documents lodge these
letters/documents together with payment in acceptance of the Rights Offer
before the Offer Closing Date.
Taking a View
This phrase has two meanings. Firstly, it can refer to an
investor taking a bullish or bearish view of the market depending on whether
he believes market trends will rise or fall -usually this would be reflected
in his transaction. Secondly, it can refer to the length of time that one intends
to keep a share - shares can be bought with a short, medium or long-term
An agreement or treaty between two countries intended to avoid
double taxation of income.
Technical analysis is the study of market action, primarily
through the use of charts, for the purpose of forecasting future price
Terms of Issue
Terms issued by the warrant issuer in conjunction with the
Offering Circular and sets out the contractual arrangements between the
Warrants Issuer and the Warrant Holder.
The Total Return Indices (TRI's)
The Total Return Indices (TRI's) measure total return on the
underlying indices, combining both capital performance and reinvested income.
The TRI's are calculated using declared dividends. Although in reality there
is a timing delay between the xd date and the receipt of dividends (payment
date), it is considered preferable to assume all income is reinvested on the
xd date rather than incur the complications of allowing a time lag before (I)
reinvestment of the net dividends, and (ii) different and uncertain time lag
before reinvestment of any tax reclaimed.
The specified parameter or its multiple by which the price of a
selected security may vary when trading at a different price from the last
price, whether the movement is up or down from the last price
Shares which are difficult to obtain because the owners are
reluctant to part with them. These shares are easy to spot because they have
little or no volume traded. Generally, it is not a good idea to deal in such
Transaction which must be concluded within a specific time. (The
seller is responsible to the buyer for any rights and/or dividends that
accrue between sale and delivery.)
Time decay (Theta) measures the rate of reduction in the price
of a warrant resulting from the passage of time. In other words, it is the
part of a warrants premium that is not intrinsic value. A warrants value will
decline at an increasing rate as expiration nears. Theta is defined as a
warrants sensitivity to the passage of time and is expressed as the expected
percentage change in the price of a warrant over a week.
That portion of a warrant's value related to the time remaining
until expiry of the warrant.
A newsletter which concentrates on giving its readers tips on
which share to buy and sell and when to transact. Such letters should be
followed with caution, and their advice used only in conjunction with your
The annual value of the coupon rate on a fixed interest
security, allowing for the capital difference which will be gained or lost on
maturity and assuming that the interest is compounded.
The highest point on a share price or other graph over a defined
Profits before tax and before interest.
Total profits ratio
'Total profits' divided by 'total capital employed' and
expressed as a percentage. (A rough measure of the return earned by a company
on its resources.)
The ease with which a share can be traded. Some shares are free
dealing and highly tradable, others are tightly held.
A match of buy and sell.
The date on which a sell or buy transaction is executed. Trade
date usually signifies the intended transfer of ownership of the securities
and entitlements to the buyer. Also known as 'T' day.
Matching by JET of buy and sell orders entered by JSE member
Transfer deed signed in blank
Transfer form on which portion A, giving details of the
registered owner of the shares, is signed by the seller (transferor), and
portion B, relating to the transferee, is left blank. (Share certificates
attached to a transfer deed thus signed are negotiable documents and should
be safely stored - preferably in a bank.)
Legal document transferring the ownership of shares. A transfer
form, duly completed by the seller, must accompany a share certificate when
it is lodged with the company on behalf of the purchaser for registration of
the shares into his name.
Office which handles the transfer of shares from one shareholder
Person or body to whom shares have been sold. (This name is
filled in on portion B of the transfer deed.)
Registered shareholder who is selling or transferring the shares
out of his/her name.
Transmuted listing statement
Information which has to be published by a company when its
trading character has changed since the granting of the initial listing, or
where it has acquired a major asset
Straight lines drawn on a chart below reaction lows (in an
uptrend) or above rally peaks (in a downtrend) that determine the steepness
of the current trend. The breaking of a trendline usually signals a trend
A price pattern with three prominent troughs, all three troughs
occur at about the same level.
A price pattern with three prominent peaks, all three peaks
occur at about the same level.
Uncertificated securities tax (UST)
The Uncertificated Securities Tax Act, 1998, provides for the
payment of uncertificated securities tax (UST) on the issue and on the
transfer of beneficial ownership of securities which are listed on the JSE
Securities Exchange (excluding debentures). The rate of tax is 0,25% of the
issue price or selling price of the securities. In addition, uncertificated
securities tax is not payable in respect of the buy-back of its own shares by
a listed company. Warrant issuers and registered brokers are also exempt.
The commodity/asset/financial instrument on which a derivative
is based. For example, in the case of an option, the product which the
buyer/holder has the right to buy/sell.
The share, shares, commodity, currency or index subject to
purchase or sale upon exercise of the warrant.
Underwriting an issue
Guarantee to purchase any shares in a new issue or rights issue
not fully subscribed by the by the public.
Undistributed profits tax
Additional tax levied on that portion of a company's profits
that have not been distributed to shareholders.
Undistributed, accumulated or unappropriated profi
That portion of net distributable profits left in the company
after the payment of dividends and the appropriation to reserves as
represented by the balance on the appropriation account.
Stocks or shares of companies which are not listed on an
Market deal where the information given to the clearinghouse by
the buying and the selling brokers do not match. (Such deals are returned to
the market for correction.) This was only possible in a manual trading
system. It does not occur in electronic trading systems - such as JET.
Unsecured loan stock
Stock issued for money lent to a company without security and
bearing a fixed annual rate of interest. (In the event of liquidation holders
of such stock rank with other creditors.)
A term used to describe a transaction made at a price higher
than the preceding transaction price. Also called a plus tick.
Venture Capital Market. In addition to the Main Board, the JSE
created the DCM in 1989. The establishing of this board was to address the
need to assist companies specialising in venture capital projects (venture
capital conglomerates) or single venture companies. The listing requirements
for a VCM listing are less onerous than those of the Main Board but still
demand quality and stability.
The degree to which a share deviates from its average. High
volatility is associated with risk, both fundamental and technical. For
example, shares in marginal gold mines are extremely volatile often moving
10% or more in a single day, because their operations are only just
profitable or unprofitable so that their performance is highly geared to the
A measure of the variation in a price over time.
A measure of a stock's tendency to move up or down in price,
based on its daily price history over the latest 12 month period.
The number of trades in a security over a period of time. On a
chart, volume is usually represented as a histogram (vertical bars) below the
The number of shares changing hands during the trading day. In
America, this figure is calculated by adding shares bought to shares sold -
in other words, it is effectively double the volume traded, as it would be
shown on the J.S.E. In London the volume traded is not disclosed, so that the
various indicators which rely on volume cannot be used. You should keep a
careful lookout for exceptional volumes on a share, because they can give a
clue about insider trading and special situations.
Volume Weighted Average Price - VWAP
The Volume Weighted Average Price (VWAP) is calculated by adding
up the value traded for every transaction (price times shares traded) and
then dividing by the total shares traded for the period.
Non-compulsory winding up of a company
A six letter code assigned to a warrant by JSE to identify it on
The owner of a warrant.
The institution who issues the warrant.
The right to purchase or sell shares (the underlying security)
at a specified date in the future and at a specified price.
Asset that diminishes in value as it is exploited. All mines are
wasting assets because sooner or later the payable minerals in the deposit
will be exhausted.
A reversal chart pattern characterized by two converging
trendlines that connect at an apex. The wedge is slanted either downwards or
upwards demonstrating bullish or bearish behavior respectively.
Increasing difference between buyers' and sellers' prices.
(Usually indicates a drop in market activity.)
The money which is tied up in the workings of the company.
Usually calculated by adding the company's debtors, stock and cash balances,
and subtracting its creditors and other current liabilities. Most companies
try to keep their working capital to a minimum because it ties up money which
could be used for other activities and which incurs interest.
Devaluation of assets for some or other reason, one such as
An accounting term for reducing the value of an asset to zero
for some reason such as damages or complete obsolescence.
The original seller of an option. The writer is required to
fulfil the terms of the option at the choice of the holder
This is the return on an investment.
This is a graph showing a relationship of
short-term interest to long-term interest rates. When Long-term rates are
above short-term; This will be upward sloping. Long-term rates are lower than
the short-term rates the curve will have a downward slope.