This is an educational manual only and the Capital Market Authority accepts no otherwise without the prior permission of the Capital Market Authority. Capital Market. VII. ▫In the first quarter of , average prices of Argentine fi- nancial assets increased slightly. Stocks recovered with respect to the average of . Arab Bank plc or Arab Bank Group, or to Moorad Choudhry as a representative, financial markets, the time value of money and the determinants of the discount rate. Part II describes fixed income instruments, and the analysis and valuation of bonds.
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PDF | The present review article is an attempt by the researchers to make As capital market is a wider concept, lots of note worthy contribution. Contents. London - the place to raise capital. 3. The world's capital market. 5. Benefits of joining our markets. 7. Cost effective, efficient and dynamic markets. 6. Money vs. Capital Market. Money Market (貨幣市場). ▫ The market for short- term debt securities with a maturity of one year or less such as commercial papers.
First, regular bank loans are not securitized i. Second, lending from banks is more heavily regulated than capital market lending. Third, bank depositors tend to be more risk-averse than capital market investors.
These three differences all act to limit institutional lending as a source of finance. Two additional differences, this time favoring lending by banks, are that banks are more accessible for small and medium-sized companies, and that they have the ability to create money as they lend. In the 20th century, most company finance apart from share issues was raised by bank loans. But since about there has been an ongoing trend for disintermediation , where large and creditworthy companies have found they effectively have to pay out less interest if they borrow directly from capital markets rather than from banks.
The tendency for companies to borrow from capital markets instead of banks has been especially strong in the United States. According to the Financial Times , capital markets overtook bank lending as the leading source of long-term finance in , which reflects the risk aversion and bank regulation in the wake of the financial crisis.
Efforts to enable companies to raise more funding through capital markets are being coordinated through the EU's Capital Markets Union initiative.
Barclays is a major player in the world's primary and secondary bond markets. When a government wants to raise long-term finance it will often sell bonds in the capital markets. In the 20th and early 21st centuries, many governments would use investment banks to organize the sale of their bonds. The leading bank would underwrite the bonds, and would often head up a syndicate of brokers, some of whom might be based in other investment banks.
The syndicate would then sell to various investors.
For developing countries, a multilateral development bank would sometimes provide an additional layer of underwriting , resulting in risk being shared between the investment bank s , the multilateral organization, and the end investors.
However, since it has been increasingly common for governments of the larger nations to bypass investment banks by making their bonds directly available for download online. Many governments now sell most of their bonds by computerized auction. Typically, large volumes are put up for sale in one go; a government may only hold a small number of auctions each year.
HO4: Total listed equity does not have any impact on economic growth in Nigeria. Literature Review 2. If a financial market is efficient, then the best estimate of the true worth of a security is given by its current market price. In an efficient market, it is assumed that a large number of analysts are assessing the true value of firms. The analysts try to find stocks whose market prices are substantially different from their true values.
Thus, stock prices change every day, every hour, even every second as new information flows into the marketplace Levy It is a market for long term instruments which include market for government securities, market for corporate bonds, market for corporate shares and market for mortgage loans.
That is, it market for the mobilization and utilization of long term funds for development Anyanwu, According to Jhingan capital market is a market that deals in long term loans. Capital market supplies industry with fixed and working capital and finance medium-term and long-term borrowings of the central, state and local governments. Rose and Marquis see capital market as a market designed to finance long-term investments by businesses, governments and households.
Mishkin defined capital market as the market in which long-term debt generally those with original maturity of one year or greater and equity instruments are traded. Nwaolisa, Kasie and Egbunike defined capital market as a network of financial institutions and infrastructure that interact to mobilize and allocate long-term funds in the economy.
The market affords business firms and governments the opportunity to sell stocks and bonds, to raise long-term finds from the savings of other economic agents. DOI: These problems are both endogenous and exogenous. The exogenous problems are those outside the direct control of the market but which are regulation-induced.
The endogenous problems are those that are internal to the market but which are amenable to changes with improved operational procedures including the adoption of information technology. Some of these problems are discussed below: i Small Size of the Market: Among the major problems facing the Nigerian capital market is the size of the market.
At about quoted companies and a market capitalization of For example, the South African stock market has about listed companies while South Korea has about listed companies.
The small size of the Nigerian Stock market has been traced to apathy of Nigerian entrepreneurs to go public due to the fear of losing control of their businesses. Another factor is the weak private sector which is a serious constraint militating against healthy growth of the stock market. The more liquid a stock market is, the more investors will be interested in trading in the market. The lack of adequate number of investors in the Nigerian stock market is a reflection of problem of illiquidity in the market.
At an average ratio of 2 per cent per year, the turnover ratio, a measure 'of the value of shares traded relative to local market capitalization is very low in Nigeria, compared with The low trading Activities are also a result of the ownership structure. Until , when the Nigerian Investment Promotion Commission Decree 16 and the Foreign Exchange Monitoring and Miscellaneous provisions Decree 17 were promulgated to replace the Nigerian Enterprises Promotion Decree of and Exchange Control Act of , the Nigerian stock market was restricted largely to local investors apart from the original investors in foreign companies who were already in the market before the indigenisation Decree of New foreign capital had little or no access to the market.
The good performance of Botswana, Zimbabwe and Mauritius has been traced to the open door investment policy of these countries.
This often leaves only the proportion of shares held by few individuals and institutional investors for trading on the market, thus, limiting the liquidity of the market iv Delay in Delivery of Share Certificates: Prior to April, when the Central Securities Clearing System CSCS started operation, the delay in delivery of share certificates to investors and intra-firm settlements used was a problem in the market.
Many of the unclaimed certificates and dividend warrants that are being published regularly are as a result of the delay in delivery of certificates. The objective of the CSCS system is to achieve real-time transaction reporting, through automated order routing and executing system, which allows post-trade comparison and analysis, and ensures audit trail of all the market transactions.
With the recent introduction of Automated Trading System ATS , it is expected that stockbrokers will be able to do business more efficiently and thus contribute to the growth of the market. In a capital market, the operating tax policies have implications for the supply and demand for financial assets. Depending on its nature and structure, taxation could either enhance or retard capital market growth. Tax can be a source of hindrance to development when it is high or levied at multiple stages.
Currently in Nigeria, there is income tax, capital gain tax, withholding tax and company income tax. All these taxes together have the tendency of retarding investment because of their burden on investors. Most often, countries that have experienced growth in their stock market have come to realise the role which taxation plays in the promotion of investment in the stock market.
For instance, countries like Botswana, Ghana, Kenya, Mauritius, Namibia and Swaziland have recognised the important role which taxation can play in the development of the market.
Taxation of equities at both the corporate tax and dividend withholding levels is an important problem that needs to be examined. The practice in the U.
The ACT was introduced in Britain to correct the distortions which double taxation had on corporate investment. A number of developing countries like Columbia, Jamaica, Indonesia and Mexico, have one form of tax integration or the other.
Presently, Nigeria has not taken any step to reduce the burden of double taxation as incentive for investment in the capital market.
Apart from its use as a means of generating revenue, some countries have used tax policies as incentives for developing capital market. They have been used not only for the supply and demand for securities, but also as penalties for companies that were reluctant to go public. For example, Brazil used dividend tax exemption or reductions, stock acquisition tax incentives and provision of tax fund shares as incentives for developing the capital market.
Underwriting could be in the form of firm contract, or stand-by arrangement and when an issue is large, there would be need for an underwriting syndicate. An observed deficiency of the Nigerian securities market is the non-existence of effective underwriting.
Though the issuing houses claim to undertake underwriting as part of their functions, and a consortium of underwriters often exist when shares are being offered, underwriting business has hardly taken place in the real sense of it.
Underwriting entails effective placing of entire issues, and establishing or maintaining a stable trading market for the under-written securities for which there would always be a lead or managing underwriter.
Only a few of the existing issuing houses can undertake such functions that guarantee the underwriting of the shares not absorbed by the investors up to a certain percentage. When such problem arises, the lead or managing underwriter would be expected to download all such securities and distribute them to the other members of the underwriting syndicate or consortium according to predetermined ratio.
Macroeconomic policies that would ensure long-term stability are essential in attracting a sustainable long term investments.
Such policies should be conducive to both savings and investment to ensure confidence in the economy. Policies must ensure attractive long-term yields for equities in comparison with other domestic and foreign investment alternatives.
Frequent fluctuations in exchange rates and negative real rates of return on investments often force investors to move to other investment outlets or out of the economy entirely.
Using the multiple regression analysis, the study finds that Capital Market has an insignificant impact on the Economy within the period under review. Atoyebi, Ishola, Kadiri, Adekunjo and Ogundeji, seek to determine the impact of capital market on economic growth in Nigeria using annual data from to In their empirical analysis, ordinary least square test was used to verify the statistical significance of the variables used and vector auto regression technique to determine the long run relationship within the variables in their study.
Also the coefficient value of these two variables suggest that a percentage increase in market index and market capitalization will bring about on the average The stability in the system was also determined through the vector autoregressive technique.
Their study recommended that there is need to address the reported case of abuse and sharp practices by some companies in the market. There is also the need to boost the value of transactions in the Nigerian capital market; there is need for availability of more investment instruments such as derivatives, convertibles, future, and swaps options in the market. Okoye, Modebe, Taiwo and Okorie investigated the relationship between capital market development and economic growth using data on GDP proxy for economic growth , market capitalization ratio; value traded ratio and stock market turnover ratio proxies for capital market development over the period Employing the econometric methodology of the vector error correction model, their study showed that in the short-run, market capitalization ratio and turnover ratio have significant negative effect on aggregate national output GDP.
Their study also showed positive effect of value traded ratio as well as negative effect of inflation rate on GDP though not significant. Their long-run estimate showed that all the exogenous variables have significant negative impact on GDP and that changes in market capitalization ratio, value traded ratio and turnover ratio produce more than proportionate changes in GDP.
With an adjustment speed of about Their Granger causality test result shows evidence of causal impact of market capitalization ratio, value traded ratio and turnover ratio on aggregate national output. Their study further shows uni-directional causality from GDP to inflation. Their study established that stock market development constitutes a significant determinant of economic growth in Nigeria.
Yadirichukwu, and Chigbu, examined the impact of capital market on economic growth in Nigeria. In their study, a time-series research design relying extensively on secondary data covering was adopted. Their study utilized regression analysis as data analysis method incorporating multivariate co- integration and error correction to examine characteristics of time series data adopting disaggregate the capital market indices approach. Their finding suggested that two exhibited positive while two exhibited inverse and statistically significant relationship with economic growth.
Therefore the need for effective and favourable macroeconomic environment to facilitate economic growth and ensure that channels of capital market induced growth are built around effective systems; and that policy institutions are active in making systemic checks and appropriate policy innovations to ensure capital market led economic growth. Their study estimated error correction model for economic growth in Nigeria, using Vector Error Correction techniques on an annual time series data spanning from to The data used in their study were subjected to Phillip Perron Unit Root Test at level and first difference.
Their result showed that, at one percent significance level, all the variables were stationary at first differencing.
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Their result of the normalized co integrated series revealed that market capitalization rate, total value of listed securities, labor force participation rate, accumulated savings and capital formation are significant macroeconomic determinant factors of economic growth in Nigeria.
The study recommended that, for the capital market to realizes its full potentials, its environment must be enabled to promote and encourage investment opportunities for both local and international investors, since the stock market operates in a macroeconomic environment. Consequently, an improvement in the Nigerian trading system with the aim of increasing the ease with which investors can download and sell shares, could guarantee the stock market liquidity.
Akeem examined the impact of capital market on the Nigeria economy and also examined how stock exchange market has contributed to the economic growth which aims at studying the second tier securities market.
Second, lending from banks is more heavily regulated than capital market lending. Third, bank depositors tend to be more risk-averse than capital market investors. These three differences all act to limit institutional lending as a source of finance. Two additional differences, this time favoring lending by banks, are that banks are more accessible for small and medium-sized companies, and that they have the ability to create money as they lend.
In the 20th century, most company finance apart from share issues was raised by bank loans. But since about there has been an ongoing trend for disintermediation , where large and creditworthy companies have found they effectively have to pay out less interest if they borrow directly from capital markets rather than from banks. The tendency for companies to borrow from capital markets instead of banks has been especially strong in the United States.
According to the Financial Times , capital markets overtook bank lending as the leading source of long-term finance in , which reflects the risk aversion and bank regulation in the wake of the financial crisis.
Efforts to enable companies to raise more funding through capital markets are being coordinated through the EU's Capital Markets Union initiative. Barclays is a major player in the world's primary and secondary bond markets. When a government wants to raise long-term finance it will often sell bonds in the capital markets. In the 20th and early 21st centuries, many governments would use investment banks to organize the sale of their bonds.
Definition of 'Capital Market'
The leading bank would underwrite the bonds, and would often head up a syndicate of brokers, some of whom might be based in other investment banks. The syndicate would then sell to various investors. For developing countries, a multilateral development bank would sometimes provide an additional layer of underwriting , resulting in risk being shared between the investment bank s , the multilateral organization, and the end investors.
However, since it has been increasingly common for governments of the larger nations to bypass investment banks by making their bonds directly available for download online.
Many governments now sell most of their bonds by computerized auction. Typically, large volumes are put up for sale in one go; a government may only hold a small number of auctions each year. Some governments will also sell a continuous stream of bonds through other channels.Most 21st century capital market transactions are executed electronically; sometimes a human operator is involved, and sometimes unattended computer systems execute the transactions, as happens in algorithmic trading.
Instead of control objectives of these acts were good, some and restriction, the words management and provisions of these different acts were development were used frequently. Moreover, capital markets through secondary arms provide opportunities for the download and sale of existing securities among investors thereby encouraging the populace to invest in securities and fostering economic growth. If a dealer needs to manually intervene, this will often mean a larger fee.
The discussion of this article is ended with 4. The secondary market serves an important purpose in capital markets because it creates liquidity, giving investors the confidence to download securities. If it chooses shares, it avoids increasing its debt, and in some cases the new shareholders may also provide non-monetary help, such as expertise or useful contacts.
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