A brief account of the rise of the stock market

2023-09-08
Summary:

Stocks have a long history, originating from trading companies in Europe, and were first formed in the 16th and 17th centuries.

Stocks have a history spanning nearly 400 years, with the earliest stock companies being European trading companies. They sent ships to India and Asia for trade in the 16th and 17th centuries, funded by investors, and later shared profits. However, due to the extremely high risk, ships often disappear at sea, making it difficult to find investors willing to contribute. So, in 1602, Dutch shipowners formed the world's first limited liability company, known as the East India Company, to raise funds. They only issue company stocks, and investors buying stocks is equivalent to investing in every journey, greatly reducing risk. As the East India Company made money, the demand for stocks increased, driving the birth of the stock market. In 1611, the Amsterdam Stock Exchange became the world's first stock market.

stock market

China's stock trading began at the end of the 19th century, at the end of the Qing Dynasty. With the rise of the Westernization Movement, some business organizations began to appear in the form of joint-stock companies. However, due to the limited number, the stock market did not form. It was not until 1920 that Shanghai officially established a stock exchange.


So, what is a stock? Use a small example to explain. Assuming Xiaoming owns a grocery store and decides to expand his business to purchase nearby supermarkets, he lacks funds. Xiaoming has three options: borrowing from a bank or friend, dividing the company's equity into 100 shares and selling half to investors, or going public and becoming a publicly listed company for trading on the stock market. Stocks are proof of partial ownership of a company. The private sale of shares usually requires a large amount of capital and is not easily accessible. After purchasing stocks, regardless of the quantity, they become shareholders of the company and enjoy a series of rights and risks, such as attending shareholder meetings, voting decisions, and sharing company profits.


Stock prices are influenced by various factors, including a company's profitability, prospects, and market sentiment. Therefore, stock prices often experience overvaluation or undervaluation. Many investors use technical analysis or value analysis to decide whether to purchase stocks.


How do I purchase stocks? Nowadays, most securities firms offer online account opening and trading, which is cheap and convenient, and they can also trade stocks from other countries. It is recommended to choose reputable securities firms to avoid unnecessary trouble.


Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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