Financial Market - Group 2

Capital
market
48K01.2-E - Pretties
Table of contents
About Capital Market Globalization of the
01 Fundamental things about 04 Capital Market
The manifestations of the
Capital Market globalization of world Capital
Market
Example Adaptation
02 Understand more about Capital 05 How do managers adapt to
Market in reality global capital flows?
Comparing Specific case

03 Is the Capital market the same 06 Vietnam case study
as the Financial market?
01
About the capital market
Fundamental things about Capital Market
Definition
Type of financial market where long term securities are
issued and traded (more than one year).
A source for raising funds for individuals, firms, and

governments.
Types of Capital market:
PRIMARY SECONDARY
MARKET MARKET
The trading of old securities occurs in
The primary market is for
the secondary market which occurs
trading freshly issued security
after transacting in the primary
which is first-time trading.
market.
Functions of the capital market
+ Mobilization of savings to finance long - term investments.
+ Facilitates trading of securities.

+ Minimization of transaction & information cost.
+ Improvement in the effectiveness of capital allocation, with the help of competitive
price mechanisms.
+ Quick valuation of financial instruments like shares and debentures.

How does the capital market work?
The theory of the circular flow of money:
A capital market assists an economy -

providing a platform to gain funds for business
operations, development activities, or wealth
enhancement.
The function of a capital market follows the
theory of the circular flow of money.
Trades take place in the Capital Market
Capital market
Participants Capital markets vs economy
individuals and trades
institutions. long-term securities directly interconnected
The transactions are facilitated
A centralized exchange A decentralized way of trading securities

Eg: the New York Stock Exchange without a central exchange or broker.
(NYSE) Eg: over-the-counter (OTC)
02
Example
Understand more about Capital Market in reality
Globalization of the
Capital Market
The manifestations of the globalization of world capital markets
03
Manifestations
Increased cross-border capital flows: Investors are now able to easily

invest in foreign markets, which has led to increased competition and
greater efficiency in capital allocation.
Global integration of financial markets: With the growth of

multinational corporations, cross-border investments & the development
of global financial institutions. This has led to a more efficient
allocation of capital and increased liquidity in financial markets.
Manifestations
Greater influence of international investors: These investors include

sovereign wealth funds, pension funds, and hedge funds, among others.
Increased financial innovation: As financial institutions seek to develop

new financial products and services to meet the needs of global investors.
This has led to the development of new financial instruments, such as credit
default swaps and collateralized debt obligations.
Greater volatility and interconnectedness: Financial markets more

interconnected and has increased the potential for contagion and systemic
risk.
4. How Do Managers Adapt to
Global Capital Flows?
Policy actions
Diverse Multiple tools for
strategies
When addressing capital flows, many stability:
governments turn to a variety of Macroprudential policies, foreign currency
other measures in addition to interest intervention, and capital flow management
rate regulation. Macroprudential policies, in particular, can increase monetary
controls, interventions in the foreign policy autonomy and allow it to better
currency market, and capital flow concentrate on limiting inflation and
management controls are some of fostering steady economic growth.
these methods.
The long-term effects. Fiscal aspects
The advantages of IPF tools must
Fiscal attitude and public debt levels are
be weighed against potential important for nations' vulnerability to shocks,
drawbacks like slower market even if fiscal policy is less appropriate for
growth and more risk-taking. regulating capital flows than IPF measures.
Policy actions
Multilateral considerations Safeguards and metrics
The use of IPF instruments may The instruments in the IPF
have beneficial spillover effects, framework are aimed at well-
particularly if they increase defined macroeconomic and
macroeconomic and financial financial stability goals.
stability and ease trade.
Pay close attention to developments in competitiv
Finance and investment choices environment
The management will later The globalization of
regret not being able to reject the entrepreneurship may, however,
offer if the availability of finance revitalize a dormant business in a
leads them to pursue projects mature sector for management
that don't make much sense prepared to harness its potential.
economically.
05 Specific case
(Vietnam case study)
Vietnam case
Increased FDI & access to global capital markets
1 -> Vietnamese companies to expand operations &
Advantages
tap into new sources of financing.
-> Boost economic growth, create jobs, and
increase productivity in the country.
Greater risks from global economic shocks

The influx of foreign capital can lead to asset bubbles &
instability in the local financial system. 2 Disadvantages
(Vulnerable to capital flight and sudden
changes in investor sentiment).
Approaches to strengthen its financial sector & attract

FDI in a sustainable manner:
Solutions 3 + Improving transparency and regulatory oversight
+ Promoting diversification of financing sources.

Financial Market - Group 2

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Capital

Comparing Specific case

A source for raising funds for individuals, firms, and

+ Mobilization of savings to finance long - term investments.

+ Facilitates trading of securities.

+ Improvement in the effectiveness of capital allocation, with the help of competitive

+ Quick valuation of financial instruments like shares and debentures.

The theory of the circular flow of money:

A capital market assists an economy -

The transactions are facilitated

A centralized exchange A decentralized way of trading securities

Increased cross-border capital flows: Investors are now able to easily

Global integration of financial markets: With the growth of

Greater influence of international investors: These investors include

Increased financial innovation: As financial institutions seek to develop

Greater volatility and interconnectedness: Financial markets more

Greater risks from global economic shocks

Approaches to strengthen its financial sector & attract

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