Global Capital Market

Transcription

1 Global Capital Market

2 The objectives of the chapter are to: o o Identify major trends in the global capital marketplace. Provide an overview of the book s contents. 1 2

3 Trends In Global Capital Markets Deregulation Lifting restrictions that limit the activities of financial services firms. Removing restrictions on capital markets and on foreign investments. Globalization Information technology and greater cooperation provide more access to the global capital market. Technology Lower operating costs and improved transaction efficiencies. 1 3

4 Summary of Japan s Big Bang Financial Reforms Products More diverse debt instruments permitted More diverse derivatives products permitted New investment trust products developed Definition of securities reviewed and broadened Markets Transaction system in stock exchanges improved OTC market system improved Markets (cont d) Solicitation process for unlisted and unregistered stocks deregulated Stock lending market improved Clearing and settlement process for securities improved Inspection,surveillance,and enforcement strengthened Full and timely disclosure of material information required 1 4

5 Summary of Japan s Big Bang Financial Reforms (cont d) Intermediaries Brokerage commissions deregulated Activities of intermediaries deregulated Holding company structure permitted Asset management services improved Monitoring system enhanced Entry into securities businesses deregulated Measures for investor protection implemented 1 5

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7 Impact of Bankruptcy of Lehman Brothers Bursa 15Sep-10Okt 2008 US % UK % China 0.70% Jepang % Taiwan % Hongkong % Korsel % India % Singapura % Sumber yahoo finance, bloomberg, BEI, EconStats Malaysia -9.46% Indonesia % rerata % 1 7

8 Interrelations Among Several Markets in the World US UK Jepang Hongkong China Singapore India Malaysia Indonesi a US 1 UK Jepang Hongkong China Singapore India Malaysia Indonesia Sources: yahoo finance, bloomberg, BEI, EconStats 1 8

9 Market Index of Several Capital Markets Pasar Modal Jan - 31 Des 2 Jan - 30 Nov 2 Jan - 30 Nov US 6.335% 7.192% % UK 2.313% 1.927% % Jepang % % % Hongkong % % % China % % % Singapura % % % India % % % Malaysia % % % Indonesia % % % Sumber: BEI 1 9

10 Central Banking & Capital Markets

11 The objectives of the chapter are to provide an understanding of: o o o o o The U.S. Federal Reserve System. The mechanics of repurchase agreements. How open market operations affect market interest rates. Monetary policy tools of the European Central Bank. Monetary policy tools of the Bank of England and the Bank of Japan. 1 11

12 The Federal Reserve System The Fed is organized as the U.S.central bank The Board of Governors and twelve Federal Reserve Banks (FRBs). The Board resides in Washington, D.C. FRBs are in major cities throughout the United States. Federal Open Market Committee (FOMC) Seven members of the Board and five of the twelve FRB presidents. The Open Market Desk The trading desk operations at the New York Fed that implement FOMC policy objectives through trades with primary dealers. 1 12

13 Purposes and Functions of the Fed Conducts monetary policy Actions taken to influence the amount of money and credit in the economy Supervises and regulates banks Provides payment services Goals of the Fed Achieve price stability Promote sustainable growth in economic activity Support stability in the financial system 1 13

14 Federal Funds Markets The basic link between monetary policy and the economy A mechanism for institutions with excess reserves to earn a yield (federal funds rate) by selling (lending) reserves to institutions running a reserve deficit. Redistributes bank reserves but does not change the total amount of reserves. Reserves Funds held against deposits by banks Vault cash at the institution Non interest-bearing deposits at an FRB 1 14

15 Tools of the Fed Reserve requirements The Fed requires that banks to keep a percentage of their deposits on deposit at an FRB. The discount rate The rate charged to financial institutions when they borrow reserves from an FRB. Open market operations. The buying and selling of government securities that increases or decreases the amount of available reserves which results in concurrent changes in the federal funds rate. 1 15

16 Federal Open Market Committee (FOMC) Most important policymaking body of the Fed Meets eight times a year to develop policy priorities and write a directive that lays out guidelines for implementing policy. Green book: current economic conditions Blue book: money market conditions Beige book: regional economic conditions Prepares for the Chair s semiannual testimony before the House and Senate Banking Committees. 1 16

17 Federal Reserve Financial Services Supplying and distributing currency and coins Clearing checks (Automated Clearinghouse) Maintaining accounts Operating an electronic funds transfer system Fedwire Delivery-versus-payment (DVP) Various other services for the U.S.government Treasury securities auctions 1 17

18 Open Market Operations And Capital Markets Open Market Desk (OMD) The trading desk at the New York Fed Adjusts quantities of bank reserves to cause federal funds rate to approach Fed target rate. Open market operations involve: Buying and selling of government securities, either through outright purchases and sales or through temporary transactions. Arranging customer repos with dealers on behalf of foreign official accounts. 1 18

19 Open Market Operations And Capital Markets (cont d) Open market operations: Provide information about future inflation expectations Allow the government to rely on the Treasury securities for borrowing in open market operations Provide a benchmark for pricing other securities 1 19

20 Yield Curve A yield curve plots the yield to maturity against the term to maturity for Treasury securities. The yield to maturity is the annual return investors will earn if they hold the security until maturity. FIGURE

21 International Aspects Of Monetary Policies U.S. dollar s influence Held as a major reserve currency by foreign central banks for international settlement. Used as a medium of exchange in international transactions. Increasing interdependence of international capital markets Floating exchange rates Fewer restrictions on international capital flows Influence of financial events in other countries 1 21

22 The European Central Bank The European System of Central Banks (ESCB) European Central Bank Funded by member subscriptions National central banks of all fifteen European Union member states Eurosystem Comprised of the ECB and the national central banks of the member states that have adopted the euro. Has set maintaining price stability as its primary objective. 1 22

23 Eurosystem Maintains price stability by: Defining and implementing EMU monetary policy Conducting foreign exchange operations Holding and managing foreign exchange reserves Promoting the smooth operation of payment systems Monetary policy tools include: Open market operations Standing facilities (marginal and deposit) Reserve requirements 1 23

24 Steps in the European Monetary Union STAGE ONE STAGE TWO STAGE THREE Dec.1995 Early 1998 Jan.1,2002 July 1,1990 Jan.1,1994 Resolution of Resolution of the Jan.1,1999 Conversion of Start of stage one Start of stage two Madrid meeting European Council Start of stage three currency Full liberalization of Establishment of Euro will be the Confirmation of Irrevocable fixing Euro becomes capital movements European Monetary new single 1999 as starting of exchange rates legal tender Institute currency date between member states Coordination of Autonomy of Preparation of Group of ECB assumes Exchange of economic,fiscal, national central legal framework participating monetary policy notes and coins and monetary banks by end of 1996 countries responsibility policies Establishment of Start of currency Conversion of all European Central changeover monetary values Bank not yet denominated in Euros TABLE