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1、Capital Markets,14,1-2,Chapter Outline,Capital market and securities Fund raisers in the capital markets The three-sector economy of the United States Physical and electronic markets Rapid adjustment of prices as an indication of efficiency Security legislation,1-3,Security Markets,Consist of variou
2、s government bonds and corporate common stock The markets are influenced by variables like: Interest rates Investor confidence Economic growth Global crises, etc.,1-4,Types of Security Markets,Money markets Short-term markets comprising of securities with maturities of one year or less Treasury bill
3、s, commercial paper, negotiable certificates of deposits Capital markets Long-term markets consisting of securities having maturities greater than one year Bonds, common stock, preferred stock, convertible securities These securities comprise a firms capital structure,1-5,International Capital Marke
4、ts,Have played an important role over the last decade due to various factors: The Soviet Union disbanded in 1991 China has moved along a capitalistic course for several decades Central and Eastern European countries “privatized” many of their state industries during the 1990s Continuing development
5、of international “free trade”,1-6,International Capital Markets (contd),Establishment of NAFTA in 1994 CAFTA reduces trade barriers The six original members of EU abolished internal tariffs in 1968 WTO strives to further liberalize international trade Euro still considered second most important inte
6、rnational currency Value of “euro cash” in circulation now exceeds value of dollars in circulation worldwide,1-7,即北美自由贸易协定，由美加墨三方于92年签订、94年元旦起生效和实施。 内容: 关税相互减免； 取消进口限制； 坚持产地规定； 政府采购协定； 鼓励投资； 扩大相互金融服务； 发展相互自由运输； 鼓励保护知识产权； 协商争端解决机制等。,1-8,2006 Total Dollar Trading Volume on Ten Largest Equity Markets,1
7、-9,International Capital Markets as a Source of Funds,An opportunity for companies to raise debt capital at the lowest cost Many list their common stock around the world to: Increase liquidity for the stockholders Provide opportunities for the potential sale of new stock in foreign countries About 3
8、.7% of foreign investment has been invested in government securities,1-10,Competition for Funds in the U.S. Capital Markets,Securities available in the capital market: The federal government Government agencies State governments Local municipalities Investors must choose among corporate and noncorpo
9、rate securities with the desire to: Maximize returns for any given level of risk,1-11,Government Securities,U.S. government securities - Treasury Manages the federal governments debt in order to balance the flow of funds Sells short- or long-term securities to finance shortfalls or retires in case o
10、f surplus Federally sponsored credit agencies Governmental units issuing securities on a separate basis from those sold by U.S. Treasury Includes: Federal Home Loan Banks (FHLB),1-12,Government Securities (contd),Federal National Mortgage Association (Fannie Mae) Farm Credit Banks Student Loan Marke
11、ting Association State and local securities Municipal securities or tax-exempt offerings Investors - high marginal tax brackets Supported by revenue-generating projects,1-13,Corporate Securities,Corporate bonds Debt instruments having a fixed life and to be repaid at maturity As bonds come due and a
12、re paid off, the corporation normally replaces this debt with new bonds Preferred stock Least used of all long-term securities since the dividend is not tax-deductible to the corporation,1-14,Corporate Securities (contd),Common stock Sold by companies desiring new equity capital Either sold as a new
13、 issue in an initial public offering (IPO) or as a secondary offering Treasury stock: When a company purchases its own stock availability of surplus cash,1-15,Internal versus External Sources of Funds,Internally generated funds include retained earnings and cash flow added back from depreciation Com
14、position of internal funds is a function of: Corporate profitability The dividends paid The resultant retained earnings The depreciation tax shield firms avail,1-16,Internally Generated Funds: Depreciation and Retained Earnings,1-17,The Supply of Capital Funds,Household sector - major supplier of fu
15、nds Indirect investments: Household savings generated by wages Transfer payments from the government Wages and dividends from the corporations These are funneled to financial intermediaries Diverse financial institutions channel funds into commercial banks, mutual savings banks, and credit unions,1-
16、18,Flow of Funds Through the Economy,1-19,Suppliers of Funds to Credit Markets (September 2007),1-20,The Role of the Security Markets,The capital markets are divided into many functional subsets Each specific market serves a certain type of security Secondary trading: The security trades in appropriate markets not original offering Provides liquidity to investors and keeps the prices competitive,1-21,The Role of the Security Markets (contd),Security markets provide liquidity
