- Published on
KembaraXtra – Islamic Derivatives: Why Share Price Can Rise Even When a Company Makes Losses
🔹 Key Idea
👉 Share price is based on future expectations, not just current performance
✔ So even if a company makes losses today,
👉 price can rise if investors expect future improvement
🔹 1. Future Growth Expectations 📈
👉 Investors care about:
🔸 Example
👉 Investors expect future profit
✔ Share price increases
🔹 2. Temporary Loss (Not Serious)
👉 Loss may be due to:
👉 Investors think:
✔ So they continue buying
🔹 3. Strong Company Fundamentals
👉 Even with losses, company may have:
👉 Investors trust long-term potential
✔ Demand stays high → price rises
🔹 4. Speculation and Market Sentiment
👉 Sometimes price rises due to:
❗ This can be risky (closer to speculation)
🔹 5. External Factors
👉 Price may rise due to:
✔ Not just company performance
🔹 6. Simple Case Example
👉 But:
👉 Investors buy shares
✔ Price rises from RM5 → RM7
🔹 Islamic Finance Insight
👉 Acceptable if:
❌ Problematic if:
🔹 Simple Summary
👉 Loss today + strong future → price can rise
🔹 Final Exam Insight
👉 “Share prices may increase despite current losses if investors expect future profitability, as valuation is based on anticipated performance rather than present earnings alone.”
🔹 Key Idea
👉 Share price is based on future expectations, not just current performance
✔ So even if a company makes losses today,
👉 price can rise if investors expect future improvement
🔹 1. Future Growth Expectations 📈
👉 Investors care about:
- Future profits
- Business expansion
- New opportunities
🔸 Example
- Company reports loss today
- But announces:
- New technology
- Expansion plan
👉 Investors expect future profit
✔ Share price increases
🔹 2. Temporary Loss (Not Serious)
👉 Loss may be due to:
- One-time event
- Investment in growth
- Economic downturn
👉 Investors think:
- “This is temporary”
✔ So they continue buying
🔹 3. Strong Company Fundamentals
👉 Even with losses, company may have:
- Strong brand
- Large market share
- Good management
👉 Investors trust long-term potential
✔ Demand stays high → price rises
🔹 4. Speculation and Market Sentiment
👉 Sometimes price rises due to:
- Market hype
- News or rumors
- Investor optimism
❗ This can be risky (closer to speculation)
🔹 5. External Factors
👉 Price may rise due to:
- Industry growth
- Government support
- Economic recovery
✔ Not just company performance
🔹 6. Simple Case Example
- Company makes RM1 million loss
👉 But:
- Launching new product
- Expected high future revenue
👉 Investors buy shares
✔ Price rises from RM5 → RM7
🔹 Islamic Finance Insight
👉 Acceptable if:
- ✔ Based on real business expectations
- ✔ Linked to real economic activity
❌ Problematic if:
- Pure speculation
- No real basis
🔹 Simple Summary
- Share price ≠ current profit only
- It reflects future expectations
👉 Loss today + strong future → price can rise
🔹 Final Exam Insight
👉 “Share prices may increase despite current losses if investors expect future profitability, as valuation is based on anticipated performance rather than present earnings alone.”
0 Comments