How does end of financial year affect share prices?

lukelee · 28 June 2011

In the recent 2 months, the share price has droped a lot, does financial year effect the share price?

noco · 28 June 2011

Re: How does finical year effect share price

lukelee said:
In the recent 2 months, the share price has droped a lot, does financial year effect the share price?

I believe there are two main factors, apart from a few minor ones, and that is the USA economy and this disastrous Australian Labor Party.

A change of government here in Australia will see a boost in the Stock Market.

waimate01 · 28 June 2011

lukelee said:
In the recent 2 months, the share price has droped a lot, does financial year effect the share price?

Tax loss selling in the runup to June 30 can be a factor moving prices down, although watch for things to spike up on Thursday afternoon as the fundies aim for a good end of year score card. Doesn't always happen, but does sometimes.

McLovin · 28 June 2011

lukelee said:
In the recent 2 months, the share price has droped a lot, does financial year effect the share price?

To answer your question, on the last trading day of the financial year you might get some tax related selling as fund managers try to close out losing positions to get the tax loss in this FY. Share prices don't drop for two months leading up to the EOFY. There has been a whole range of issues, IMO, that have caused the correction; Greece and the discovery that Australia is not recession proof being top of the list.

Tyler Durden · 28 June 2011

I noticed a significant drop yesterday morning. I put it down to capitalising losses to end the FY, seeing that it was 27 June and there is the T+3 period.

My theory, however, goes down the toilet if selling on 30 June still counts as a sell for this FY. Anyone know?

zzaaxxss3401 · 28 June 2011

Tyler Durden said:
I noticed a significant drop yesterday morning. I put it down to capitalising losses to end the FY, seeing that it was 27 June and there is the T+3 period.

My theory, however, goes down the toilet if selling on 30 June still counts as a sell for this FY. Anyone know?

IMO the 27th June should have been the cut-off. The Share Registry will only be updated on the T+3 - I know this from missing out on a capital raising with TXN - so technically you don't own the stocks until settlement. What if you can't pay?

However, for Tax purposes it will be the date on the Tax Invoice (BUY / SELL Confirmation) which is the day on which you agreed to buy (or sell). The Tax Invoice also includes a GST component... just incase you are trading through a company and can claim the GST back (on the brokerage - not the parcel cost).

Tyler Durden · 28 June 2011

zzaaxxss3401 said:
IMO the 27th June should have been the cut-off. The Share Registry will only be updated on the T+3 - I know this from missing out on a capital raising with TXN - so technically you don't own the stocks until settlement. What if you can't pay?

However, for Tax purposes it will be the date on the Tax Invoice (BUY / SELL Confirmation) which is the day on which you agreed to buy (or sell). The Tax Invoice also includes a GST component... just incase you are trading through a company and can claim the GST back (on the brokerage - not the parcel cost).

Hmmm thanks, very interesting

I wonder then if every June 30 will be like a stock take sale for shares, hehe...

kingcarmleo · 29 June 2011

Companies manipulate profit all the time to make their balance sheet look better for EOFY, something needs to be done about it. It's important to understand the difference between Profit and Cashflow, especially with EOFY statements.

davede · 29 June 2011

Hi all,

Any one got some sources or references for the view that prices fall due to the end of the financial year? I'd be very curious to see the research.

Also curious to see a little more on 'tax loss selling' and how to avoid it being seen as a wash sale by the ATO.

On market manipulation by fund managers I do recall there being a statistically significant variation from the expected close on managed fund reporting dates. I'm still trying to dig up the reference for this (might have to dig up the old uni textbooks! )

However it is with great certainty that I can say the market has not fallen 9% from it's april 2011 high due to the end of the financial year progressively drawing closer .

zzaaxxss3401 · 29 June 2011

Tyler Durden said:
Hmmm thanks, very interesting

I wonder then if every June 30 will be like a stock take sale for shares, hehe...

You only have to look up the XAO on Google to see that a decline tends to occur around May / June before a ramp up in July - well the last couple of years anyway...

"Sell in May and stay away!"

pixel · 29 June 2011

Many good and valid reasons have been put forward by you guys.
One simple "test" has been missed though: Drag up a chart of the past 6 or 10 years and check what has been happening in the lead-up to June 30th each year. That might answer a few questions.

All Ords attached.

McLovin · 29 June 2011

davede said:
Also curious to see a little more on 'tax loss selling' and how to avoid it being seen as a wash sale by the ATO.

I think for that you really should be asking an accountant and/or solicitor.

Aussiejeff · 29 June 2011

waimate01 said:
Tax loss selling in the runup to June 30 can be a factor moving prices down, although watch for things to spike up on Thursday afternoon as the fundies aim for a good end of year score card. Doesn't always happen, but does sometimes.

Not bad. Only a day earlier than your prediction!

Might be a 2-day Fantastic Fundies Frenzy..... LOL

Gotta love those mega-rich high-rollers going for broke... well, I guess it isn't all their money their speculating with, after all.... hehe.

KurwaJegoMac · 30 June 2011

BOOM! Off flies the market. Up another 0.5% since 12:00am, now touching 1.5%!

Looks like AussieJeff was right, it's a feeding frenzy.

How does end of financial year affect share prices?

lukelee

noco

waimate01

McLovin

Tyler Durden

zzaaxxss3401

Tyler Durden

kingcarmleo

davede

zzaaxxss3401

pixel

DIY Trader

McLovin

Aussiejeff

KurwaJegoMac

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