Financial Markets Analysis and Information Case Study (FNSFMK521)

This document presents a comprehensive analysis of two financial market case studies. Case Study 1 examines the Trough/Recession stage, exploring economic indicators, government strategies, and client leveraging scenarios. It includes detailed sector and stock analysis, alongside a share trading plan with stop-loss strategies and fundamental analysis, including PE ratios and dividend yields. Case Study 2 focuses on the Expansion stage, analyzing the RBA's role, economic indicators, and investor portfolio adjustments. The solution provides recommendations for stock trading, including sell and hold strategies based on various criteria such as PE ratios, EPS growth, and dividend yields. The document also includes ASX ranking and recommendations for specific companies, providing justifications for buy, sell, or hold decisions based on financial metrics and market conditions. The assignment covers a wide array of financial concepts, including economic cycles, investment strategies, stock analysis, and portfolio management.

Analyze financial
markets and information

CASE STUDY 1
PART 1
Question 1
As per the scenario Trough or Recession stage of the economic cycle is the economic moving
into.
Question 2
(1) There are identified different economic indicators that can help to government to identified
changes in GDP such as:
 Return on investment is low
 Increase business spending
 Australian dollar depreciates
 Increase in savings and a decrease in the availability of funds in the economy
(2) There are various areas of the economy are benefit such as:
 Borrowings and real estate values increase
 The price of exports become cheaper
 Increase in government spending and a decrease in taxes
(3) Whenever economic development slows or the economy enters a slump, a government might
implement an expansionary fiscal strategy, such as increasing spending without increasing taxes.
On the other hand a contractionary strategy may limit economic growth through decreasing
spending while retaining tax collections.
 Increase in government spending and decrease in taxes
 Increase in savings and a decrease in the availability of funds in the economy
 Demand for export increases
PART 2
Question 1
Client based on leveraging: $80000*60% = 4800

Question 2
Top three sectors
Sector EPS Growth (%)
Financials 67.72 55.76 14.27
Materials 32.30 43.21 41.26
Energy 25.69 23.01 12.87
Top 2 stocks
Financials
WF13
Top
100 Eagle Bank Co 224.9% 6.00% 14.36 13.60 5.36% 29.64
WF6 Top 20 Citizen Bank Co 159.7% 17.50% 15.18 12.96 4.73% 44.31
Materials
WM77
Top
150 North Star Co 41.9% 9.70% 8.79 8.04 3.98% 3.71
WM46
Top
150 Discovery Mines Co 37.0%
150.00
% 14.19 5.69 3.59% 5.30
Energy
WE5 Top 50 Lios Oil and Gas Co 16.4% 31.40% 15.98 12.20 4.21% 3.94
WE10
Top
150 WesPearson Co 31.4% 31.60% 13.91 10.61 4.26% 13.31
PART 3

Share trading plan
Portfolio: Date of buy:
Goal:
Generate profit
from price action Stock buy price:
Term: 2 years Trade number:
Stock name: Eagle bank co Stock code: WF 13
Money Management
Total capital:
% of capital for
purchase:
Amount of purchase:
Number of shares: 1
Brokerage costs:
Stock in top 20:
Stock in top 50:
Stock in top 150: Top 100
Stop loss
% of purchase price: Stop loss amount $
Exit price:
Fundamental
analysis
Stock Market Average
PE ratio: 14.36
Dividend yield: 5.36
% franked
EPS: 224.9
Last year: Current: Expected:

CASE STUDY 2
PART 1
Question1
As per the scenario Expansion stage of the economic cycle is the economic moving into.
Question 2
(1) RBA will do with the official cash rate to support the economy
 The Government buys securities to increase the flow of money in the economy
 The official interest rate rises
 The Government sells securities to reduce deposits in the banking system
 The Government increases spending and taxes
(2) Indicators would signal that the economy is changing in this economic cycle
 Inflation rises
 Unemployment rises
 The official interest rate falls
(3) Assets would typically dominate an investor’s portfolio during these economic conditions
 Long-term investors increase their holdings in cash
 Consumer spending decreases and confidence falls
 Real estate values rise
PART 2
(a)
1. Sell stocks and conduct top down analysis
2. Sell stocks which fall below the buy price
3. Sell stocks with declining forecasted EPS
(b)
1. Stocks with a PE ratio above 15 should be given priority

2. Must buy and hold for the long term to make profits
3. Hold no more than one stock in each sector
4. Hold no less than 5 stocks in a portfolio
(c)
1. Hold no more than 15 stocks in a portfolio
2. Sell stock if 2% stop loss is triggered
3. Sell stocks which do not pay dividends
4. Sell some stocks now to optimize the performance of the portfolio
PART 3
ASX
Code
Ranking Company Name Recommendations
to hold and sell
Reasons for
recommendations
WM77 Top 150 North Star Co
Buy nor sell a
security
Rising EPS
WM17 Top 150 Timber Co
Same pace as
comparable
companies
No dividend
WM18 Top 150 Festival Mines Co
Buy nor sell a
security
Low PE ratio
WM19 Top 100 Metals Co
Dividend yield is
more important than
EPS
Good EPS
WM16 Top 20
Grandore Minerals
Co
Hold no more than
10 stocks in a
portfolio
Triggered stop loss
WM15 Top 150 Reknir Group Co
Hold stocks for a
minimum of 5 years
Rising EPS

WN9 Top 20
National Farmers
Co
Hold no more than
12 stocks in a
portfolio
Negative EPS
WS3 Top 50 Retailistic Co
Current EPS is the
most important
criteria
Triggered stop loss
WT1 Top 200 Tcom Co
same pace as
comparable
companies
No dividend
WI5 Top 150 Large Bay Co
Hold no more than
10 stocks in a
portfolio
Good EPS
WI1 Top 100
Cserv Computers
Co
Dividend yield is
more important than
EPS
Low PE ratio