CAPITAL

MARKET

Student Name: Charlot Albarico Degree Program: BSBFM

Section: 3.1BSBAFM-CY2-PM Mobile Number: 09102341112

Professor Name: Dan Jeward Rubis Email Address: 61801516

TASK 1: Read the materials about the Financial System and its participants and components.
These articles will help you to understand the role each participant plays in the system. After
reading the materials, you will be asked to create a concept map.
These guidelines will be helpful:
1. Examine how the materials discussed the six participant or sectors and the components in the
Financial System and their vital role in the system.
2. Based on what you have read in the article, create a paradigm or a concept map showing the
participants and components of the Financial System.
3. On a separate sheet of paper, discuss the concept map you have created with at least 300
words. You may also include examples in your explanation.
 INDIRECT FINANCE
FUNDS FUNDS
FINANCIAL
INTERMEDIARIES
ULTIMATE ULTIMATE
BORROWERS LENDERS

FUNDS

HOUSEHOLDS HOUSEHOLDS
GOVERNMENT
GOVERNMENT
FOREIGN
FOREIGN PARTICIPANTS
PARTICIPANTS
FINANCIAL
MARKET
DIRECT FINANCE

A financial system is a network of financial institutions – such as insurance companies, stock

exchanges, and investment banks – that work together to exchange and transfer capital from one
place to another. Through the financial system, investors receive capital to fund projects and
receive a return on their investments.
In my concept map, Lenders and borrowers come from the household sectors, business or
commercial sectors, government sector or foreign sector. This group is the group who undertakes
the borrowing and lending process. Financial intermediaries exist due to the fact there may be a
warfare among creditors and debtors in phrases in their economic necessities (time period,
chance, volume, etc.). For example, a surplus company may desire to lend for three months,
while a deficit company might also additionally desire to borrow for two years. The financial
intermediaries remedy those divergent necessities with the aid of using (for example) making an
investment in the devices of debt of presidency with the short-time period finances of the family
area invested with them. They additionally carry out many different functions inclusive of
lessening of chance for creditors, growing a bills system, the efficacy of financial policy, and so
on. Financial markets consist of the debt marketplace, the cash marketplace and the bond market.
Money introduction is a large element in the economic system. Money introduction facilitates
with figuring out the hobby rates, inflation rate, the price of income-assets belongings and the
price of any economic instrument. Price discovery is decided with the aid of using the general
deliver and call for of credit.
A financial system can be perceived on a company, regional, or global scale, which facilitates the
practice of exchanging funds between one entity to another. It involves various players such as
insurance companies, stock exchanges, investment banks, and more. Financial systems are
regulated, as their processes influence and contribute to the growth of many assets.

TASK 2: Read the articles about the classifications of Financial Market specially about the
Capital Market. Examine each classifications of Financial Market and how they became the heart
of financial system. After which, you will be tasked to create a Venn Diagram.
1. Examine how the articles discussed the key differences between the two
classifications of financial markets, as to term of maturity and as to type of issue.
2. Based on what you have read in the article, create four (4) Venn Diagrams on
three separate sheets of paper showing the differences between:
A. Capital Market and Money Market
B. Bond and Stock Market
C. Primary Market and Secondary Market
D. Capital Market Instruments and Money Market Instruments.
3. Venn diagrams help to visually represent the similarities and differences between
two concepts.
4. On a separate sheet of paper, discuss the points you have mentioned in your
Venn Diagram.

Capital Market and Money Market

 Individual
Investor  Individual
 Financial market Investor not included
 Instruments
Ex.equity share  Instruments used
 More than 1 year money market
 Max 1 year
 Bond and Stock Market

 Dividend in return
 Interest in return
 No return
most traded types of  Yes return guarantee
guarantee
assets  Preferential treatment when
 Voting rights in the
bond matures
company

Primary Market and Secondary Market

 Indirect purchase
 Direct purchas
 Security sold sultiple
 Security sold once -Listing times
 Buy and sell between  Buy and sell investors
-Control by
investor and company stock only
exchange  Gain sales investors
 Gain sales company  Depends on demand
 Fixed price and supply force

Money Market Instruments and Capital Market Instruments

  Surplus funds in  Surplus funds for those who
short period of time required
 No need to borrow Financial Market  Promote investment and
from banks savings
 Economy in use of cash  Balance eco.growth

Capital Market and Money Market

 The money market secures short term liquidity for both investors and sellers. The capital market
secures long term financing and investment opportunities. Typically, less than a year on the
money market. Typically, multiple years on the capital market. The money market trades
instruments such as Treasury bills, certificates of deposit, promissory notes, commercial papers
and bonds redeemable in less than a year. The capital market trades in most bonds, stocks and
other instruments either backed by equity or redeemable in more than one year. Money markets
are considered low risk. Capital markets are potentially high risk depending on the asset. Money
markets have low returns. Capital markets can have considerably higher returns.

Together, the money market and the capital market comprise a large portion of what is known as
the financial market.

Bond and Stock Market

One major difference between the bond and stock markets is that the stock market has central
places or exchanges where stocks are bought and sold. The other key difference between the
stock and bond market is the risk involved in investing in each. When it comes to stocks,
investors may be exposed to risks such as country or geopolitical risk (based on where a
company does business or is based), currency risk, liquidity risk, or even interest rate risks,
which can affect a company's debt, the cash it has on hand, and its bottom line. Bonds, on the
other hand, are more susceptible to risks such as inflation and interest rates. When interest rates
rise, bond prices tend to fall. If interest rates are high and you need to sell your bond before it
matures, you may end up getting less than the purchase price. If you buy a bond from a company
that isn't financially sound, you're opening yourself up to credit risk. In a case like this, the bond
issuer isn't able to make the interest payments, leaving itself open to default. Stock market
performance can broadly be gauged using indexes such as the S&P 500 or Dow Jones Industrial
Average. Similarly, bond indices like the Barclays Capital Aggregate Bond Index can help
investors track the performance of bond portfolios.
Indeed, stocks and bonds are two of the most traded types of assets—each available for sale on
several different platforms or through a variety of markets or brokers

Primary Market and Secondary Market

The securities are initially issued in a market known as Primary Market, which is then listed on a
recognized stock exchange for trading, which is known as a Secondary Market. The prices in the
primary market are fixed whereas the prices vary in the secondary market depending upon the
demand and supply of the traded securities. In the primary market, the investor can purchase
shares directly from the company. In the Secondary Market, investors buy and sell the stocks and
bonds among themselves. In the primary market, security can be sold only once, whereas in the
secondary market it can be done an infinite number of times. In the Primary Market, the amount
received from the securities is the income of the company, but in the Secondary Market, it is the
income of investors. The primary market is rooted in a specific place and has no geographical
presence as it has no organizational setup. Conversely, the Secondary market is present
physically, as a stock exchange, which is situated in a particular geographical area. Investment
bankers do securities trading in the case of the Primary Market. Conversely, brokers act as
intermediaries while trading in the secondary market.
The securities issued in the primary market are invariably listed on a recognized stock exchange
for dealings in them. Further trading in secondary market can also be carried out only via a stock
exchange platform. The listing on stock exchanges provides liquidity as well as marketability to
the securities and facilitates discovery of prices for them. Via the mechanism of Listing
Agreement between the issuer companies and the stock exchange the stock exchanges exercise
considerable control over the new issues as well securities already listed on the stock exchange.
Exchanges ensure that there is continuous compliance by the issuer company of the clauses
provided in the Listing Agreement.
Capital Market Instruments and Money Market Instruments.
Money market instruments provide opportunity to the banks and financial institutions to use their
surplus funds profitably for a small period of time. They include commercial banks as well as
large non-financial corporations, states and other local governments. Capital market enables the
transfer of funds from entities with surplus funds to those who required. In case of a developed
money market, there is no need to borrow money from commercial and central bank. However, if
there is a short of cash requirement, they can call in some of their loans from the money market.
Also, the most of the commercial banks would rather prefer to recall their loans than recalling it
from the central banks at a higher rate of interest. Capital market Promotes investment and
savings.

TASK 3: When you have finished going through the experiences and reading resources. When
you have finished going through the experiences and reading resources contained in this module,
you will prepare an analysis based on the cases that are provided. Please take note of the writing
conditions in crafting your case analysis and expectations that follow:
1. Read and understand the scenario on the given case. Your highest possible grade is 100 points.
2. Express your analysis and thoughts on the given case in 400 words. You must indicate your
total word count on the last page of your work.
3. The components of your Case Analysis Shall be the following:
A. Introduction
B. Statement of the Problem
C. Solution to the Problem
D. Conclusion
 CASE

IPOs, short selling: What to expect in PSE for 2021

Introduction:
The Philippine Stock Exchange is aiming for more companies to go public this year even
as the economic environment “remains fragile,” according to President and Chief Executive
Officer Ramon Monzon. The stock exchange has a target for at least three companies and four
real estate investment trusts to hold initial public offerings in 2021, Monzon said in a statement.
More REITs are expected to list once the Securities and Exchange Commission approves
proposed changes to the main and small enterprises boards’ IPO rules, he said. The Philippines is
forecast to start growing only in the second quarter of 2021, putting it among the slowest to
recover from the coronavirus pandemic that has ravaged the global economy. The central bank,
which held its key interest rate last month at a record-low 2%, has said it stands ready to use a
full range of tools to boost growth. “Restoring the confidence of investors will continue to be a
challenge,” Monzon said. The government’s plan to start mass vaccinations in the second half
could “prompt a strong rebound in corporate earnings and thus allow the economy to take off,”
he said.

Statement of the Problem

Philippines is forecast to start growing only in the second quarter of 2021, putting it
among the slowest to recover from the coronavirus pandemic that has ravaged the global
economy. Monzon said “Restoring the confidence of investors will continue to be a challenge,”.

Solution to the Problem

Last year, grocer MerryMart Consumer Corp., broadband operator Converge ICT
Solutions Inc. and real estate investment trust AREIT Inc. debuted on the exchange. Funds raised
totaled 104 billion pesos ($2.2 billion) last year, up 2.9% from 2019, Monzon said. IPOs
accounted for 44.3 billion pesos of the total, while follow-on offerings were 41.2 billion pesos.
More companies could return to the stock market as the Philippines recovers, the CEO said. The
stock exchange is also planning to implement short selling, and introduce new sector and
thematic indexes such as mid-cap and high dividend yield, he said. IPOs. Despite the economic
uncertainties due to the pandemic, Monzon remains optimistic and targets 3 initial public
offerings (IPOs) and 4 real estate investment trusts (REITs) for 2021. "We are confident
companies will be enticed to list given the revised listing rules for REITs, and even more once
we receive SEC approval on our proposed amendments to the main and SME (small and medium
enterprise) board listing rules," Monzon said.
Conclusion
Real estate developer DoubleDragon Properties Corporation, through DDMP REIT
Incorporated, earlier filed for a REIT IPO, which covers 7 buildings of its leasable properties.
DDMP REIT is aiming to raise P14.7 billion and is expected to list on February 26. Monzon is
expecting better market performance for 2021, as the government plans to start mass vaccination
and further ease quarantine restrictions. Short selling on the Philippine bourse will be limited to
stocks in the benchmark index and will be capped at 10% of their outstanding shares, according
to Monzon. No changes or adjustments are being considered for existing short-selling rules,
which he believes are "adequate, reasonable and conservative." Discussions regarding short
selling in the Philippines come amid the GameStop Corp. incident. Monzon said the chances of
similar short squeezes happening locally "is quite small, if not nil."