Financial Market

Financial Market

1. MONEY & FOREIGN EXCHANGE MARKET

   • Money Market
     • An organized exchange market where participants can lend and borrow short-term, high-quality debt securities with average maturities of one year or less.
     • Allow individual investors to invest small amounts of money in a low-risk setting
     • Function
       • Financing to local and international traders who are in urgent need of short-term funds.
       • The central bank is responsible for guiding the monetary policy of a country and taking measures to ensure a healthy financial system. Through the money market, the central bank can perform its policy-making function efficiently.
       • Provides an easy avenue where businesses can obtain short-term loans to finance their working capital needs.
   • Foreign Exchange Market
     • Over a counter (OTC) global marketplace that determines the exchange rate for currencies around the world
     • FUNCTIONS
       • (Transfer Function) - transfer of funds (foreign currency) from one country to another for the settlement of payments.
       • (Credit Function) - FOREX provides a short-term credit to the importers so as to facilitate the smooth flow of goods and services from country to country.
       • (Hedging Fuction) - hedging the anticipated or actual claims/liabilities in exchange for the forward contracts

2. CAPITAL MARKET

   • Capital market is the market in which longer term debt (generally with original maturity of 1 year >) and equity instruments are traded
   • Equity Capital Market (BURSA MALAYSIA)
     • Subset of the broader capital market, where financial institutions and companies interact to trade financial instruments and raise capital for companies.
     • Secondary Equity Market - Involve stock exchanges and are the primary venue for public investment in corporate equity.
     • Primary Equity Markets - raising money from private placement and mainly involves OTC markets.
   • Bond Market (ETBS)
     • A marketplace where investors buy debt securities that are brought to the market by either governmental entities or corporations.
     • FUNCTIONS
       • Gov use bond proceeds to finance infrastructual improvement & pa debts
       • Companies use to raise capital

3. DERIVATIVES MARKET (BURSA MALAYSIA)

   • Financial market for financial instruments such as futures contracts or options that are based on the values of their underlying assets.
   • Can be categorize
     • Hedgers
     • Speculators
     • Arbitrageurs
     • Margin traders
   • FUNCTIONS
     • Risk Management
     • Price Discovering
     • Operational Advantage

4. OFFSHORE MARKET (LABUAN IOFC)

   • A market where funds are moved actively by market participants (surplus and deficits units) in an offshore financial centre having specific and unique characteristics.
   • FUNCTIONS
     • Favorable tax laws
     • Reduced risk, greater growth potential
     • Significant cost savings
     • Assets protection
     • Loose regulations

5. place where financial assets are created or transferred.