BBK3413 Investment Analysis

Transcription

1 BBK3413 Investment Analysis Topic 2 The Securities Market

2 2

3 FOR DISCUSSION The amount of equity one holds in a company has nothing to do with being possible to get fired as a CEO. But it does help. In Mark Zuckerberg's case, Facebook has two classes of stock: Class A shares that carry one vote apiece (the same shares you can buy on the stock exchange), and Class B shares that carry 10 votes per share. Zuckerberg has a boatload of Class B shares and, as a result, controls roughly 60 percent of the voting power at the company. According to SEC Filling: Statement of Beneficial Ownership Mark Zuckerberg owns 29.3% of Facebook s Class A shares, but only around 20% of the company as a whole. That makes this stake worth closer to $13.6 billion rather than $18 billion. In addition to that, Zuckerberg owns other types of shares, harder to track. So his total stake is worth more than that." 3

4 1. Securities Market The securities market is the market for equity, debt, and derivatives, and hybrid securities. The debt market, in turn, may be divided into three parts, viz., the government securities market, the corporate debt market, and the money market. The derivatives market may divided into two parts, viz., the option market and the futures market.

5 2. Financial Market The transfer of funds between primary lenders and ultimate borrowers takes place through the creation of securities or financial assets. If the investor deposits the money in the fixed deposit of a commercial bank, the bank issues him a fixed deposit receipt which is a financial asset. Issue of share certificate by the company is also the example of financial asset.

6 2. Financial Market The commodity being exchanged is a financial asset instead of a physical asset. The lender of funds (or investor) is the buyer of the asset and the borrower of funds is the seller of the asset (or issuer of the security). The mechanism or system through which financial assets are created and transferred is known as the financial market. When the financial assets transferred are corporate securities and government securities, the mechanism of transfer is known as securities market.

7 3. Segments of Financial Market Different types of securities are traded in the securities market. These may include ownership securities, debt securities, short-term securities, long-term securities, government securities, non-government or corporate securities. On the basis of the maturity period of securities traded in the market, the securities market is segmented into money market and capital market.

8 4. Types of Financial Market The financial market may be classified as primary market or secondary market. Primary Market: The market mechanism for the buying and selling of new issues of securities is known as primary market. This market is also termed as new issues market because it deals in new issues of securities.

9 4. Types of Financial Market Secondary Market: It deals with securities which have already been issued and are owned by investors, both individual and institutional. These may be traded between investors. The buying and selling of securities already issued and outstanding take place in stock exchanges. Stock exchanges constitute the secondary market in securities.

10 5. Participants in the Financial Market The major participants are the buyers and sellers of securities or the investors and the issuers. Financial intermediaries are the second major class of participants in the financial system. There are two types of financial intermediaries in the financial system, namely banking financial intermediaries; and non-banking financial intermediaries such as insurance companies, housing finance companies, unit trusts and investment companies.

11 5. Participants in the Financial Market Another group of participants in the financial system comprises the individuals and institutions who facilitate the trading or exchange process in the system.

12 5. Participants in the Financial Market Stock Exchanges: A stock exchange is an institution where securities that have already been issued are bought and sold. The Malaysian stock exchange is called Bursa Malaysia. Listed Securities: Securities that are listed on various stock exchanges and hence eligible for being traded there are called listed securities. Presently about 1,000 securities are listed on Bursa Malaysia.

13 6. What are securities? What are securities? Definition: a legal representation of the right to receive prospective future benefits under stated conditions. 13

14 7. The Malaysian Stock Market The Malaysian stock market is known as Bursa Malaysia Presently, 925 companies listed on Bursa Malaysia, represents RM1.47 trillion of market capitalisation Bursa Malaysia comprises 2 markets: Main Market ACE Market 14

15 8. Recent Notable 15

16 Total Funds Raised in $2,164 million 16

17 IPOs in Regional Markets in

18 9. The 2 Markets on Bursa Malaysia Bursa Malaysia Main Market ACE Market For established companies with a profit track record of 3 to 5 full financial years or companies with a sizeable business An alternative sponsor-driven market designed for companies of all business sectors that have excellent growth potential 18

19 10. Criteria for Listing on Bursa Malaysia Criteria for Listing Quantitative Operating track record Profit requirement Market capitalization Qualitative Sustainable business Business prospects Quality of management & directors Stage of development Risk management Corporate governance 19

20 11. Quantitative Criteria for Listing Quantitative Criteria Main Market Uninterrupted PAT of 3-5 FY, with aggregate of at least RM20m PAT of at least RM6m for the most recent full FY ACE No minimum operating track record or profit requirement Market capitalization of at least RM500m upon listing 20

21 12. Qualitative Criteria for Main Market Identifiable Core Business Good Management No Conflicts of Interest Strong Business Prospects Healthy Financial Position Good Corporate Governance 21

22 12. Qualitative Criteria for ACE Market Growth Prospects Capable Directors and Management Commitment to Compliance Responsible Directors Risk Management Good Corporate Governance 22

23 12. Qualitative Criteria for LSE Aim and Main Market 23

24 13. Ten largest stock exchanges in the world by market capitalization in 2011: 1. New York Stock Exchange (NYSE) - Headquartered in New York City. Market Capitalization (2011, USD Billions) 14,242; Trade Value (2011, USD Billions) 20, NASDAQ OMX - Headquartered in New York City. Market Capitalization (2011, USD Billions) - 4,687; Trade Value (2011, USD Billions) 13, Tokyo Stock Exchange - Headquartered in Tokyo. Market Capitalization (2011, USD Billions) 3,325; Trade Value (2011, USD Billions) 3, London Stock Exchange - Headquartered in London. Market Capitalization (2011, USD Billions) 3,266; Trade Value (2011, USD Billions) 2, Shanghai Stock Exchange - Headquartered in Shanghai. Market Capitalization (2011, USD Billions) 2,357; Trade Value (2011, USD Billions) 3,

25 13. Ten largest stock exchanges in the world by market capitalization in 2011: 6. Hong Kong Stock Exchange - Headquartered in Hong Kong. Market Capitalization (2011, USD Billions) 2,258; Trade Value (2011, USD Billions) 1, Toronto Stock Exchange - Headquartered in Toronto. Market Capitalization (2011, USD Billions) 1,912; Trade Value (2011, USD Billions) 1, BM&F Bovespa - Headquartered in Sao Paulo. Market Capitalization (2011, USD Billions) 1,229; Trade Value (2011, USD Billions) Australian Securities Exchange - Headquartered in Sydney. Market Capitalization (2011, USD Billions) 1,198; Trade Value (2011, USD Billions) 1, Deutsche Börse - Headquartered in Frankfurt. Market Capitalization (2011, USD Billions) 1,185; Trade Value (2011, USD Billions) 1,

26 14. Other World Markets The New York Stock Exchange (NYSE) sometimes known as the "Big Board It is by far the world's largest stock exchange by market capitalization of its listed companies at US$ trillion as of May Average daily trading value was approximately US$153 billion in

27 15. Major U.S. Security Markets Some criteria to list on NYSE the degree of national interest relative position and stability in the industry prospects of maintaining its relative position 27

28 15. Major U.S. Security Markets The American Stock Exchange: Lists stocks of smaller-sized companies 28

29 16. Major U.S. Security Markets-NASDAQ NASDAQ is an over-the-counter (o-t-c) market "NASDAQ" originally stood for National Association of Securities Dealers Automated Quotations. It is the second-largest stock market comparing to official stock exchanges by market capitalization in the world, after the NYSE. 29