5.3 Capital Market 资本市场

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1. Definition of Capital Markets 资本市场的定义

A capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise long-term funds.

It is defined as a market in which money is provided for periods longer than a year. Stock and bond markets are two major capital markets.

2. The Purpose of Capital Markets 资本市场的目的

Firms and individuals use the money markets primarily to warehouse funds for short periods of time until a more important need or a more productive use for the funds arises.

By contrast, firms and individuals use the capital markets for long-term investments. The capital markets provide an alternative to investment in assets such as real estate or gold.

3. The Participants of Capital Markets 资本市场的参与者

The primary issuers of capital market securities are central and local governments and corporations.

Corporations issue both bonds and stock

The largest purchasers of capital markets securities are households.

4. Capital Market Trading 资本市场交易

 The primary market is where new issues of stocks and bonds are introduced. Investment funds, corporations, and individual investors can all purchase securities offered in the primary market. When firms sell securities for the first time, the issue is an initial public offering (IPO).

A secondary is where the sale of previously issued securities takes place. There are two types of exchanges in the secondary market for capital securities: organized exchange and over-the-counter (OTC) exchange.

5. The Instruments of Capital Market 资本市场工具

1)Bonds 债券

Bonds are securities that represent a debt owed by the issuer to the investor. Bonds obligate the issuer to pay a specified amount at a given date, generally with periodic interest payments.

Most bonds have maturities of between 10 and 30 years. Long-term bonds traded in the capital market include long-term government bonds, municipal bonds, and corporate bonds.

2)Stocks 股票

A share of stock in a firm represents ownership. A stockholder owns a percentage interest in a firm, consistent with the percentage of outstanding stock held. This ownership is in contrast to a bondholder, who holds no ownership interest but is rather a creditor of the firm.

There are two basic types of equity securities: common stock and preferred stock.

3)Mortgages 抵押

Mortgages are loans to households or firms to purchase housing, land, or other real structure, where the structure or land itself serves as collateral for the loans.

 A developer may obtain a mortgage loan to finance the construction of an office building, or a family may obtain a mortgage loan to finance the purchase of a home.

4)Mutual funds 共同基金

A mutual fund is a type of professionally-managed collective investment scheme that pools money from many investors to purchase securities.

An open-end(ed) fund is a collective investment scheme which can issue and redeem shares at any time. Closed-end(ed) funds  are mutual funds with a fixed number of shares (or units) with such shares usually being tradable between investors .

Checkpoint:

Contrast investors use of capital markets with their use of money markets. What are the primary capital market securities and who are the primary purchasers of these securities?