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CHAPTER 1 :red_flag: OVERVIEW FINANCIAL MARKETS & INSTITUTIONS -…
CHAPTER 1 :red_flag: OVERVIEW FINANCIAL MARKETS & INSTITUTIONS
DEFINITIONS
MARKET
:part_alternation_mark:A venue
where sellers and buyers me
et to
exchange goods and services.
FINANCIAL MARKET
:part_alternation_mark:A p
lace where individuals and organizations
wanting to
borrow funds are brought together
with those
having a surplus of funds.
:part_alternation_mark:Facilitates movement of money from savers to users
IPO
:fast_forward:An
initial public offering
(IPO) is
where a company issues stock
in the
public market for the first time.
:fast_forward:“Going public” enables a
company’s owners to raise capital
from a
wide variety of outside investors.
Once issued, the stock trades in the secondary market.
TYPES OF FINANCIAL MARKETS
PHYSICAL ASSETS VS. FINANCIAL ASSETS
SPOT VS. FUTURES
MONEY VS. CAPITAL
MONEY MARKETS
:soccer:Money markets trade debt securities or instruments with maturities of one year or less
CAPITAL MARKET
:basketball:Capital markets trade stocks and long- term debt with maturities greater than one year
PRIMARY VS. SECONDARY
PRIMARY MARKET
:star:Where new issues of a securities are sold to initial buyers.
:star:This is the only time the issuing firm ever gets money for the securities.
:star:Eg. Apple Computer decides to issue additional stock and an investor purchases some of the newly issued shares.
SECONDARY MARKET
:eight_pointed_black_star:Where previously issued securities are traded.
:eight_pointed_black_star:The issuing corporation does not get any money for stocks traded on the secondary market.
:eight_pointed_black_star:Eg. An investor buys existing shares of Apple stock in the open market.
PUBLIC VS. PRIVATE
IMPORTANCE OF FINANCIAL MARKETS
:beer_mugs:Facilitate the flow of capital from investors to the users of capital.
For savers :left_right_arrow: opportunities for investment & returns on their money saved/invested.
For users :left_right_arrow: capital with the necessary funds to finance their investment projects.
:beer_mugs:Facilitate promote economic growth.
FINANCIAL INSTITUTIONS IN MALAYSIA
FINANCIAL INSTITUTIONS
:moneybag:Commercial banks
:moneybag:Islamic banks
:moneybag:Investment banks
:moneybag:Insurance / Takaful
FINANCIAL INTERMEDIARIES
:moneybag:Money brokers
:moneybag:Takaful / Insurance brokers
:moneybag:Financial advisers
DEVELOPEMENT FINANCIAL INSTITUTIONS
:moneybag:Bank Pembangunan
:moneybag:SME Bank
:moneybag:Agro Bank
:moneybag:EXIM Bank
OTHER MARKETS
FOREIGN EXCHANGE MARKETS
:paperclip:Trade currency for immediate delivery (spot) or for some future delivery
:paperclip:Subject to foreign exchange risk due to currency fluctuations
DERIVATIVES
:pen:Highly leveraged financial securities linked to underlying security
:pen:Potentially high-risk
:pen:Used for hedging and speculating