Book 📖 read: Asia’s stock market from the ground up - Herald van der Linde, published 2022. 

Chapter 2, page 44 Myths and misconceptions

Why is the stock market rallying when the economy is so Bad?- The Wall Street journal on 8 May 2020

There’s no relationship between the economic growth and the performance of stocks. 

Quite the reverse, a stronger economy is often bad news for the market. 

in essence, the stock market is nothing more than a bunch of companies that allow their shares to be traded in a stock exchange. 

the total value of all shares of a company is what is called the market capitalisation or “market cap”. 

It’s true that business is impacted by the state of economy, i.e how many people have a job, how many products are bought and sold, the level of investment made in a particular year and how many goods are traded with other countries. But that does not mean the stock market reflects the strength of the economy. 

What happens in an economy can have a bearing on listed companies, but it is wrong to say that whatever happens in the economy is reflected in the price of stocks. This has implications for how to get to grips with Asian stock markets. Often there is no need for technical economic analyses. To understand them, we need to look at them from the ground up, identify the biggest players and see what makes these companies tick. 

Stock market indexes that financial media refer to on daily basis is a benchmark, a way of measuring how a given market or particular market, is performing. It reflects the value of a small but representative selection of companies. 

For example, the Hang Seng index covers 50 companies of about 65% of market cap of the HK stock exchange. 

There are many types of indices that track specific markets, individual industries, sectors, regions, small companies, or special classes of companies (Jakarta Islamic Index). 

Morgan Stanley capital international (MSCI) is a global index provider, has indices that follow mega-trends in china, robotics, and renewable energy. Others include Financial Times Stock Exchange (FTSE) and the Standard & Poors 500 (S&P 500). 

2) The fact that I like Haidilao Mala and what they sell tells me absolutely nothing about the attractiveness of their stock. This is because a stock is not a company. 

A stock is a right to a fair, equitable portion of the spoils of the company, also called equity, with means equal rights to profits. The words - stocks, shares and equity all mean the same thing.