CAPITAL MARKET

Presented by:
Apiado, Mary Joy
Bordon, Julius
Delfin, Joshua
Sarmiento, Sheina
 CAPITAL MARKET
O It is a financial market in which long-term debt(over a year) or
equity-backed securities are bought and sold.
O It channel the wealth of savers to those who can put it to long-
term productive use, such as companies or governments
making long-term investments.
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O It can be either a primary or secondary market.

O Primary market- new stock or bond issues are sold

to investors, often via a mechanism known as
underwriting. The main entities seeking to raise
long-term funds on the primary capital markets are
governments(which may be municipal, local or
national) and business enterprises (companies)
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O Secondary market- existing securities are sold and
bought among investors or traders, usually on an
exchange, over-the-counter or elsewhere. The
existence of secondary markets increases the
willingness of investors in primary markets, as they
know they are likely to be able to swiftly cash out
their investments if the need arises.
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O Primary Market
For example, company XYZ Inc. hires four underwriting firms to
determine the financial details of its IPO. The underwriters detail that
the issue price of the stock will be $20. Investors can then buy the IPO
at this price directly from the issuing company. This is the first
opportunity that investors have to contribute capital to a company
through the purchase of its stock. A company’s equity capital is
comprised of the funds generated by the sale of stock on the primary
market.
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O Secondary Market

For example, if you go to buy Amazon (AMZN) stock,

you are dealing only with another investor who owns
shares in Amazon. Amazon is not directly involved
with the transaction.
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O It is subdivided into the following:

A. Stock market- which provides capital through the

issuance of shares and allows the subsequent trading
thereof in the secondary market.
B. Bond market- which facilitates financing through the
issuance of bonds and enables the subsequent trading
thereof.
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O Stock market is a place where investors go to trade equity
securities. It has central locations or exchanges where
stocks are bought and sold.
O Bond market is where investors go to trade (buy and sell)
debt securities. It is mainly sold over the counter rather
than in a central location.
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O Advantages of Capital Markets

a) Government and ordinary businesses secure long-term

investment that permits ambitious projects to take place.
b) Capital markets promote economic growth
c) They create jobs
d) They support technological innovation
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O Disadvantages of Capital Markets

a) The dividend is not tax-deductible

b) The rate of profit is generally low
c) Expensive source of finance
d) Market prices of shares keep fluctuating
 CONCLUSION
O To sum up, in an undeveloped country where capital
seems limited, the absence of a developed capital
market is a huge barrier to economic growth and
capital formation. Therefore, one can safely say,
capital markets play a constructive role in moulding
the development of a country’s economy.