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CHAPTER 1 INVESTMENT AND SECURITIES MARKET - Coggle Diagram

- - - - SHARE CONSOLIDATION
        
        Share Consolidation (Reverse Stock Split): Combining a set number of shares into one.
        Effect: Reduces the number of shares trading on the stock exchange, increases individual share price proportionally, but combined value remains unchanged.
        Purpose: Initiated to reduce the number of shares trading, thus reducing the number held by existing shareholders while maintaining market capitalization.
      - BONUS ISSUE / BOND DIVIDEND
        
        Bonus Issue/Stock Dividend: Additional shares given to shareholders, increasing share capital but not market capitalization funding from company's earnings or share reserves.
        Opportunity Cost: Earnings used for bonus shares could be used elsewhere.
        Equity: No dilution of shareholders' equity; constant ratio maintains relative equity.
        Purpose: Attract retail investors, provide alternative to cash dividends, show financial health.
      - RIGHTS ISSUE
        
        Rights Issue: Invitation for existing shareholders to purchase additional new shares.
        Rights: Allow purchase of new shares at a discount on a future date
        Purpose: Raises additional capital, often for meeting financial obligations like debt settlement.
        
        Benefit to Shareholders: Opportunity to increase exposure to stock at a discounted price.
      - CASH DIVIDEND
        
        Cash Dividends: Payments made to shareholders on a per-share basis, periodically (monthly, quarterly, semi-annually, annually)
        Approval: Requires Board of Directors' (BOD) approval; companies review dividend policies periodically.
        Malaysia Tax System: Single-tier; dividends are tax-exempt for shareholders. No tax deductions or credits required. Corporate shareholders can pass on exempt dividends to their shareholders, who are also exempt.
      - STOCK SPLIT
        
        Stock Split: Increases number of shares to boost liquidity; does not change total company value.
        Purpose: Lowers the price of a single share, making stock more affordable.
        Bonus Shares in Malaysia: Can be distributed tax-free to shareholders.
    - - Corporate exercise is an event initiated by a public company that potentially affect its shareholders. It must be agreed upon by company’s board of directors (BOD) and authorized by the shareholders.
- - - - CERTIFICATE OF DEPOSITS (CDs)
        
        A short term deposit with bank. Bank pays interest and principal to depositor at end of maturity period.
      - COMMERCIAL PAPER
        
        Short term unsecured debt issued by large corporations at a discount from face value and returning face amount at maturity. For example: Shell CP and Petronas CP
      - TREASURY BILLS
        
        Short term (equal or less one year) government securities issued at a discount from face value and returning face amount at maturity.
      - REPURCHASE AGREEMENTS (REPOS)
        
        Short term sales of government securities with an agreement to buy repurchase the securities at higher price.
      - WHAT IS MONEY MARKET
        
        Facilitates flow of short-term securities.
      - BANKER'S ACCEPTANCE (BAs)
        
        An order to a bank by a customer to pay a sum of money at future date. Acceptance sell at a discount from the face value of the payment order
    - - Trading of money market instruments, fixed income and equity securities, and derivatives products with non-residents or offshore clients (individuals or corporations).
    - - FIXED INCOME SECURITIES
        
        i) Treasury Notes or Bonds
        
        Long-term Government Debt Obligations: 1-10 year period, semi-annual payments, sold at/near par value, return par value at maturity.
        Examples: Malaysian Government Securities (MGS), Malaysian Treasury Bills (MTB), Bank Negara Bills (BNB).
        
        ii) Corporate Bonds
        
        Long-term Corporate Debt: Issued by private and public companies, pays semi-annual coupons, returns face value at maturity.
        Example: Nestle 10-year 12% bond.
      - EQUITY SECURITIES
        
        i) Commons Stock
        
        Ownership shares in publicly held corporations.
        Shareholder Rights: Voting rights and potential dividends.
        Trading: Can be bought and sold freely on stock exchanges.
        
        ii) Preferred Stock
        
        Non voting shares in a corporation usually
        paying a fixed stream of dividend
      - WHAT IS CAPITAL MARKET?
        
        A market that facilitate the floe of long-term securites.
    - - OPTIONS
        
        CALL OPTION - The right to buy an assets at specified price on or before a specified expiration date.
        
        PUT OPTION - The right to sell an asset at specified price on or before a specified expiration date.
      - FUTURES
        
        Oblige traders to purchase or sell an asset at an agreed upon price at a specified future date.
      - WHAT IS DERIVATIVES MARKET?
        
        Allow for buying and selling of
        derivative securities
- - - - Bull Market Bullish
        
        Favourable markets because of the rising in prices
        
        Investor / Consumer optimism
        
        Economic growth and recovery
        
        Government stimulus
      - Bear Market
        
        Unfavourable markets because of the falling in prices
        
        Investor / Consumer pessimism
        
        Economic slowdown
        
        Government restraint
  - - - A private firm appoint an underwriter which usually the investment banker offer to sell new shares to the public investor for the first time to raise the capital.
      - Timeline for IPO process
        
        T
        
        Board approves IPO and appointment of advisers
        
        Structuring / Pre - consultation with Securities Commissions
        
        Due diligence / verification of information
        
        Preparation of reports / applications
        
        T + 8 Weeks
        
        Submission of application and Prospectus to the SC
        
        Public exposure of Prospectus (for 15 market days)
        
        Submit Initial Listing Application to Bursa Malaysia
        
        Processing of application and Prospectus clearance by the SC (within 60 working days)
        
        T + 11 Weeks
        
        Public exposure of Prospectus ends
        
        Issuance of queries and suggestions for disclosure enhancements
        
        T + 19 Weeks
        
        Approval from SC and other authorities
        
        Registration of Prospectus with the SC and Registrar of Companies
        
        Pricing / Signing of underwriting agreement
        
        T + 20 Weeks
        
        Launch of Prospectus
        
        T + 22 Weeks
        
        Listing and Quotation of Securities
- - - - EXAMPLE: Buying shares expecting future proceeds to justify time and risk.
        REAL ASSETS: Land, properties, and machineries.
        REASON FOR INVESTING: Tradeoff present consumption for larger future consumption by saving money now.
        
        WHO ARE THE INVESTOR?
        
        INDIVIDUALS: Invest in stocks/shares, bonds, commodities, real estate.
        CORPORATIONS/GOVERNMENT: Examples include Khazanah Nasional, EPF (KWSP), Tabung Haji.
        TYPES OF INVESTMENTS: Plants, equipment, machinery, investment portfolios (equities, properties, foreign assets).