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CHP 4: CAPITAL MARKET (EQUITY&BOND) - Coggle Diagram
CHP 4: CAPITAL MARKET (EQUITY&BOND)
EQUITY MARKET
Trade long term securities
corporations raise fund by issuing new stocks & shares (IPO) / trade shares in secondary market
Common stock
security that represents a portion of owners's capital
Owners = shareholders (share profit and losses)
Brokerage Firms
intermediaries between investors and operations of exchanges
Securities Commission
regulatory institution in equity market
advise MOF relating to securities and features contract
approve corporate bonds issues
Indexes / Averages
Indexes - current price behavior of group of stocks in relation to a base value at an earlier time
Averages - arithmetic average price behavior of a group of stocks at a given point of time
Bursa Malaysia Composite Index
BMCI : (aggregate market value on current date / aggregate market value on base date) x 100
aggregate market value = market price x no. of shares outstanding
criteria - companies give substantial contribution to Malaysia's economy , large market capatalization
TYPES OF MARKET
Primary Market
1st time issuance via IPO
IPO = going public / flotation
issuer will receive cash proceeds from new issues
Secondary Market
for previously issued securities
issuer does not receive cash proceed
COMMON STOCK
to raise funds through IPOs
stockholders : part of the company, has right to vote, has right on the earnings and assets of the company, entitle for any incremental profits of the company
Advantages
high returns, voting and preemptive rights, easy to trade, liquidity
Disadvantages
fluctuation of prices, lower dividend
Types of CS
Blue chip stocks - Growth stocks -Income stocks - Cyclical stocks - Defensive stocks - Speculative stocks
Risk Investing in Stock Market
Business risk, Financial risk, Purchasing power risk, Liquidity risk, Interest rate risk, Market risk
Factors Affecting Stock Prices
Economic factor, Industry outlook, Corporate earnings, International stock market condition, Crowd psychology, Political scenario
BOND MARKET
use to raise funds
issuer pay PERIODIC INTEREST + PRINCIPAL
maturity, coupon rate, indenture, call provision
bondholders will not receive incremental income
Types of Bonds
Malaysian Government Securities 2. Malaysian Treasury Bills 3. Government Investment Issues 4. Bank Negara Monetary Notes-i 5. BNM Bills 6. Cagamas Instruments 7. Commercial Papers 8. Medium-Term Notes 9. Corporate bonds 10. Malaysian Islamic Treasury Bills
Participants : BNM, FI, Provident pension funds, Corporations, Investment banks, Rating agency, Insurance companies, Foreign fund managers