Aigerim Nagayeva
Student of the
Program Master of Science in Finance
Kazakh British Technical University
Fundamental Analysis:
Kazakhstani Securities Market
For the first time term ‘fundamental
analysis’ was introduced by Benjamin Graham and David Dodd in their book
“Security Analysis” published in 1934. They determined it as an instrument for
predicting future exchange prices for shares.
Today fundamental analysis
represents an evaluation of many different factors, which influence financial
and economic activities of a company. In its turn this evaluation influences
market value of the company’s securities. There are plenty of factors, which
one can consider in the fundamental analysis and their choice depends from
situation to situation. However, it should be clearly pointed out that
fundamental analysis is a separate type of analysis which applies the tools of
financial and economic analysis, but which is directed to the determination of
the true market value of securities. On the base of fundamental analysis an
investor can make an appropriate decision about his or her investments.
On the opinion of Maxim Efimov in
his dissertation work “Fundamental analysis of issuers in investment and
regulatory activity of the government on securities market” (2001, Moscow),
fundamental analysis should be considered from two positions: fundamental
analysis of securities and fundamental analysis of the company-issuer of the
shares.
If we talk about Kazakhstani securities market, it is rather
difficult to implement methods of fundamental analysis in the conditions of
Kazakhstani fund market for the purpose of share value forecast. Some
fundamental factors do not work on Kazakhstani fund market, which is operating
comparatively short period against the background of Western fund markets.
There are about 113 issuers registered on JSC ‘Kazakhstani Stock Exchange”
which was established in 1993.
So the possibility of fundamental
analysis application in conditions of Kazakhstani market should be considered
from the position of fundamental analysis of company-issuer. In this case, as
well as in the case of fundamental analysis of securities, investor can
evaluate the ability to generate future cash flow. But as a result of
fundamental analysis of company-issuer investor will be able to make an
investment decision in relation to the company-issuer as well as decisions on
company-issuer management. And by means of decisions on management the investor
will get an opportunity to influence cash flow or even control it.
Thereby, fundamental analysis of a
company-issuer should include the following sections:
·
Macroeconomic factors analysis
o
State of the national economy
o
Economic policy
o
Political situation
o
Legislation
o
Conjuncture of world commodity and
financial markets
·
Industry factors analysis
o
Competitiveness
o
Current cyclic recurrence
o
Life cycle stage and state of the
industry
·
Microeconomic factors analysis
o
Business model
o
Company management
o
Grocery market niche
o
Technology
o
Scientific and innovative potential
o
Financial state
o
Investment projects
o
Dividend policy
o
Structure of stock ownership
o
Corporate management quality
o
Affiliation
o
Stock inventory
o
Transactions with shares
On the base of such fundamental
analysis an assessment of risks, yield and liquidity can be carried out. Then
analyzing the effectiveness of the investments regulatory or investment
decisions can be made. In other words, there will be an opportunity to make
strategic investment decision, including decisions on management of property in
the form of shares of the company-issuer, rather than making decision on sale
or purchase of shares on the securities market.
Bibliography:
1) Graham B., Dodd D. Security Analysis, McGraw Hill Companies, 1996
2) Efimov M. Fundamental Analysis of Issuers in Investment and Regulatory
Activities of the Government on the Securities Market, Moscow, 2001
3) Klein P.J., B.R. Iammartino Getting Started in Security Analysis, John
Wiley & Sons, 2010
4) Kim H. Fundamental Analysis
Worldwide: Investing and Managing Money in International Capital Markets, John
Wiley & Sons, 1996