Anda di halaman 1dari 30

Capital and Securities Market

Prof. GERRY B. BADILLO, MBA

DESCRIPTION AND RATIONALE I. II. III. Introduction to Capital and Securities Markets Familiarize the elements of Philippine Capital Markets Class discussions based on case analysis and computations

GOALS AND OBJECTIVES I. II. III. IV. Familiarize the concept of Philippine Capital Markets Understand the role of intermediaries and regulators Obtain solid foundation and fundamental concepts of the capital market Familiarize the concept of stock valuation and analysis

V.

Identify the advantages and disadvantages of investing in capital markets

STUDENTS DELIVERABLES Participation during class discussion and recitation Group reporting Visit either to BSP or PSE Long Quizzes Midterm and Final Exams

STUDENTS DELIVERABLES Participation during class discussion and recitation During class recitation, students will be given chances to express what they learned about the topic. Follow up question will be given to improve their grades. A= 85 Group reporting Based on content and relevance of the topic Punctuality Manners in reporting 60% 20% 20% B= 80 C= 75

Total
Visit either to BSP or PSE Long Quizzes Midterm and Final Exams

100%

CLASSROOM RULES OF CONDUCT Discipline inside the classroom Class shall start with opening prayer Students shall adhere to express mutual respect In expressing ideas or grievances, students shall not use defamatory language Cell phones and other gadgets shall be turned off while inside the classroom Copying, looking, and exchanging notes during examination shall be prohibited Punctuality Expected to be in the classroom as scheduled, Submission of requirement as scheduled. Demerits will be imposed for late submission, to wit: 2 days delay 1 week delay More than one week delay 5 points deduction 10 points deduction 5 points for every week of delays

Inhibit to prepare assignments, take home quizzes and reports inside the classroom. Absences or tardiness equivalent to 11 hours before the midterm exam shall be automatically dropped. Excuse letter shall be submitted prior to scheduled activities/commitment.

STUDENTS MONITORING SHEET


Name:
Surname First M.I. 2X2 PHOTO

Couse: Section:
Date: 11/16/13 11/23/13 Recitation Gropup Report Assignments

Quizes

Attendance

11/30/13
12/08/13 12/15/13 1/5/2014 1/12/2014 1/19/2014 1/26/2014 2/2/2014 2/9/2014 2/16/2014 2/23/2014 3/2/2014 3/9/2014

Bonifacio Day

GRADING SYSTEM

BASE 50 GRADING SYSTEM

Outline
I. II. III. IV. V. VI. VII. VIII. IX. Overview of Capital Market The Philippine Capital Market Regulators and Functions Market Integrity Characteristics of Stocks Investment Principles Trading Principles Fundamental Analysis Technical Analysis

CAPITAL MARKET
A market in which individuals and institutions trade financial securities. Organizations/institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. Thus, this type of market is composed of both the primary and secondary markets.

CAPITAL MARKET
A market in which individuals and institutions trade financial securities. Organizations/ institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. Thus, this type of market is composed of both the primary and secondary markets. (invesotpedia.com)

Primary Market
A market that issues new securities on an exchange. Companies, governments and other groups obtain financing through debt or equity based securities. Primary markets are facilitated by underwriting groups, which consist of investment banks that will set a beginning price range for a given security and then oversee its sale directly to investors.

Primary Market
A market that issues new securities on an exchange. Companies, governments and other groups obtain financing through debt or equity based securities. Primary markets are facilitated by underwriting groups, which consist of investment banks that will set a beginning price range for a given security and then oversee its sale directly to investors.

Secondary Market
A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves. The Philippine Stock Exchange, Inc. , being the only bourse in the country, commenced buying and selling of securities via scripless trading. The Exchange performs both primary and secondary market.

Secondary Market
A market where investors buys and sells securities or assets from other investors, rather than from issuing companies themselves. The Philippine Stock Exchange, Inc. , being the only bourse in the country, commenced buying and selling of securities via scripless trading. The Exchange performs both primary and secondary market. (gbb)

Stock Market
To illustrate using equities market, suppose ABE Co. decided to raise more funds by issuing 1 million new shares of stock for Php100 per share. ABE Co. offers these shares in the market and investors would purchases portions of the offered for a total of Php100M. Intermediaries will facilitate the marketing and registrations of shares to settlement houses. This time, the investor obtains stock certificates giving him partial ownership of the company. ABE Co. gets the Php100M in funds they wanted to raise.

Bond Market
To illustrate how a corporate bond moves through capital markets, suppose ABE Co. needs to raise Php10M. ABE Co. offers a 10year bond on the bond market with a par value of Php100. Intermediaries will facilitate the marketing of bonds. The bond is purchased by interested investors, fund managers and corporations wishing to earn interest on the Php100 that they have subscribed. ABE Co. receives the Php100M in cash and the investor receives a bond and the promise of repayment plus interest. Should the bondholder later decide he no longer wants the bond, he can sell it to another investor in the marketplace.

Should this investor wish to no longer hold these stocks, he can sell them to another investor in the stock market for the current market price. Should the company have extra cash, it could buy the stock back as well.

Philippine Capital Market Instruments


SHARES OF STOCKS An instrument issued by the Company to its subscribers as evidence of its indebtedness through equity raising. TREASURY SHARES shares of stock which were previously issued and fully paid, but subsequently reacquired by the issuing corporation by purchase, redemption, donation, or through some other lawful means.

BOND any interest-bearing or discounted government or corporate security that obligates the issuer to pay the holder a specified sum of money, usually at specific intervals, and to repay the principal amount of the loan at maturity. The holder is a creditor of the issuer rather than a partial owner.

COMMERCIAL PAPERS short-term obligations with maturities ranging from 2 to 270 days issued by banks, corporations, and other borrowers to investors with temporary idle cash

EXCHANGE TRADED FUND (ETFs) An Exchange Traded Fund or ETF is an openend investment company that trades its shares in the stock exchange.

Why is there a need to regulate the capital market?


Because the business dealings in a securities market involve using Other Peoples Money.

Objectives of Securities Regulation

Protect the investors


Ensure that the markets are fair, efficient and transparent

Reduce systemic risk

Pyramid of Regulation
3rd Level SEC
2nd Level: SROs PSE and CMIC
3rd Level: Securities & Exchange Commission The Commission: (a) regulate, investigate, or supervise the activities of persons to ensure compliance; (b) supervise, monitor, suspend or take over the activities of the Exchange and clearing agencies; and, (c) impose sanctions for the violation of laws and the rules, regulations and orders issued. 2nd Level: SROs - The PSE and Capital Market Integrity Corp (CMIC) comply and enforce compliance to its members with the provisions of the SRC, its implementing rules and regulations and the rules of the Exchange.

1st Level : Individual Firms

1st Level : Individual Firms The Management of every Broker Dealer establish and maintain an appropriate and effective compliance function within the firm which is independent of all operational and business functions.

What is market integrity?


It is the extent to which a market operates in a manner that is, and is perceived to be fair and orderly and where effective rules are in place and enforced by regulators so that confidence and participation in the market is fostered.

What is market integrity?


It is the extent to which a market operates in a manner that is, and is perceived to be fair and orderly and where effective rules are in place and enforced by regulators so that confidence and participation in the market is fostered.

The Stock Market


a place where stocks are bought and sold.

The Philippine stock market is the place where people can invest in publicly listed corporations.
On August 27,1927, The Manila Stock Exchange (MSE) was formed. Its operation was suspended during the Japanese Occupation on 1940. The MSE resumed its operation on 1946 after the Liberation. On May 27,1963, The Makati Stock Exchange(MkSE) was organized and started its operation on November 6, 1965. On July 14,1992, The PSE was incorporated with its objective to have one stable securities market. On December 23, MSE and MkSE forged and issued a joint declaration on the unification of the country's two bourses under the Philippine Stock Exchange, Inc. to consolidate logistics and hasten development of the capital market.

TRADING CYCLE
Buying Client (Php)
Selling Client (Shares)

Broker (Executes Orders)

Psetrade System

Broker (Executes Orders)

Settlement Banks
(BDO, RCBC, MBTC)
SCCP Clearing House

PDTC
(Depository)

PDTC
(Depository)

Settlement Banks
(BDO, RCBC, MBTC)

Broker (Receives the Corresponding Shares)

Broker (Receives the Selling Proceeds)

Buying Client (Shares)

Selling Client (Php)

Risk Pyramid

Financial Market
Money Markets Capital Markets

Bank accounts
Treasury bills
Commercial Papers

Bonds

Equities

Stock Market
www.pseacademy.com.ph

MONEY MARKET the market of highly liquid, short-term fixed-income instruments such as t-bills, commercial paper, and bank certificates of deposits

CAPITAL MARKETS markets where capital funds are traded. Included are private placement sources of debt and equity as well as organized markets and exchanges.

TREASURY SHARES shares of stock which were previously issued and fully paid, but subsequently reacquired by the issuing corporation by purchase, redemption, donation, or through some other lawful means.

BOND any interest-bearing or discounted government or corporate security that obligates the issuer to pay the holder a specified sum of money, usually at specific intervals, and to repay the principal amount of the loan at maturity. The holder is a creditor of the issuer rather than a partial owner.

COMMERCIAL PAPERS short-term obligations with maturities ranging from 2 to 270 days issued by banks, corporations, and other borrowers to investors with temporary idle cash

STOCK MARKET a place where stocks are traded to investors. It is composed of the primary and secondary markets. Two basic types: organized securities exchange and overthe-counter market.

Risk and Reward Principle


High risk
aggressive
3 days to 1 yr

Summit

Options Futures Stocks

moderately aggressive

Middle

Real estate Equity mutual funds High income bonds or debt

1 yr to 2 yrs

moderately conservative

Base

Government bonds or debt Money market or bank accounts Cash deposits, notes, bills Cash and cash equivalents

conservative
2 yrs and above

Low risk

www.pseacademy.com.ph

Fixed Income vs. Variable


FIXED INCOME INSTRUMENTS are those that provide a return in the form of fixed period payments and the eventual return of principal at maturity. Examples are savings, Treasury bills, and government bonds. VARIABLE INCOME INSTRUMENTS are those that provide a return based on an underlying measure such as shortterm interest rates.

www.pseacademy.comph

Stocks

shares of ownership in a corporation buyer of stock = stockholder/shareholder stockholder/shareholder = part owner participates in the companys growth and future profits/losses

equities or shares

TYPES OF SHARES OF STOCKS


Class A Class B Class B stocks are shares that can be bought or sold by both Filipinos and foreign investors.

Class A stocks are shares that can be bought or sold solely by Filipino investors.

WARRANTS refers to a derivative instrument which grants the holders the right but not the obligation to buy (in the case of a call warrant) or sell (in the case of put warrant) a stated number or shares of stock at a specified price and at a specific time in the future.

Philippine Deposit Receipts (PDR) a security which grants the holder right to the delivery of sale of underlying share. PDR are evidences or statements certificates of ownership of corporation. the the not nor a

According to Rights
PREFERRED STOCK in event of liquidation, shareholders have priority over common shareholders has fixed/guaranteed dividend no voting rights COMMON STOCK in the event of liquidation, common stockholders have rights to the companys assets only after debts and preferred stockholders have been paid in full shareholder exercises control by electing board of directors and voting on corporate policies or matters

www.pseacademy.com.ph

According to Characteristics
Blue Chip stocks These are stocks of stable, profitable, and well-known public companies, and have a long history of steady revenues and dividend payments. Income stocks Usually blue chips but may also include smaller companies. Growth stocks Dont usually pay dividends; reinvest earnings to fuel expansion projects. Defensive stocks Provide constant dividend and stable earnings even during adverse market conditions.

Cyclical stocks
These companies produce or offer services that are low in demand during slowdown and increases when business peaks. Speculative stocks Those that rise quickly when economic growth is strong and falls rapidly when growth is slowing down.