What is the capital market? What does capital market mean?
The capital market is a long-term capital market. It refers to the place where securities financing and operation of fund borrowing and securities trading lasts more than one year, also known as the medium and long-term capital market.
The capital market can be divided into the medium and long-term bank credit market and the securities market according to the different financing methods.
If classified based on the basic nature of financial instruments, the capital market can be divided into equity markets and bond markets. The former refers to the stock market and the latter refers to the bond market. The main certificates circulating on the stock market are company stocks. Unless the company closes business, shareholders holding stocks have only annual dividend income from their equity assets and cannot immediately claim the company's assets. The basic characteristics of various debt instruments circulating in the debt market, including various bonds, commercial promissory notes, certificates of deposit, and loans, are that they have a certain period of time, a relatively definite rate of return, and a full claim right.
The capital market is a part of the financial market, which includes all institutions and transactions related to the provision and demand of long-term capital. Long-term capital includes part of the company’s ownership, such as stocks, long-term government bonds, long-term corporate bonds, large negotiable certificates of deposit over one year, real estate mortgage loans, and financial derivatives. It also includes long-term loans such as collective investment funds, but does not include Commodity futures.
The capital market is a form of market, not a physical location. It refers to all the people, institutions and their relationships that trade in this market.
In terms of its details, there are different definitions of the view of the capital market. Some financiers only regard transactions between certified objects as the content of the capital market, and divide uncertified loan transactions into the loan market. Other financial experts see both as capital markets. It is recognized that long-term capital is the difference between this market and other financial markets such as derivative markets and currency markets.
Capital market participants
The investor obtains the right to obtain capital in the future as evidenced by the contract by investing its capital in the fundee. The two parties also agree on an interest to be paid to investors. General interest is paid annually. The level of interest rates is mainly determined by the payee's ability to pay and the level of interest rates in the capital market.
In the capital market, the recipient is the demander of capital and the provider of future payment rights.
Market activities in the capital market include the buying and selling of stocks and bonds, the increase of the capital of limited companies, and loans to natural persons.
Type of capital market
The contract period of capital transfer in the capital market is generally more than one year. This is the difference between the capital market and the short-term currency market and derivative market.
The capital market can be divided into primary and secondary markets:
In the primary market, new capital-absorbing securities are issued and demanded by investors.
Securities already issued on the secondary market changed hands.
If a market meets the requirements of a stock exchange, then this market is an organized capital market. Generally speaking, through the concentration of time and place, such an organized market can improve market liquidity and reduce transaction costs, thereby enhancing the effect of the capital market.
Characteristics of international capital markets
1. Absorb and organize domestic and foreign funds through market mechanisms, and carry out medium and long-term distribution and redistribution.
2. The transaction focuses on security, profitability, and liquidity, and both borrowers and lenders attach great importance to the stable and long-term cooperative relationship between both parties.
3. There are various risks such as political risk, default risk, interest rate risk, exchange rate risk, business risk, etc., which require various hedging measures.
The significance of the capital market to the national economy
In the national economy, the capital market has the function of transforming financial capital into century capital. The meaning is
1. Accept financial capital (investment) that is not used for consumption
2. To achieve a market balance between providers and demanders by establishing market prices
3. Direct capital to the most effective investment possible
4. Through competition among capital demanders, capital can be invested in the most effective use, which can increase the wealth of the entire national economy.
Tasks in the national economy
Deadline conversion
Through the time limit conversion, the time limit requirements between the fundee and the investor are coordinated.
Batch conversion
The capital market can pool the money of many small investors into a large investment.
Risk conversion
Unsecured income in the future can be transformed into current guaranteed income.
Perfect market and bank
To simplify the model of the national economy, theorists sometimes assume a perfect market. In a perfect market, the bank loses its meaning because its profit is zero and it loses its influence on savers and businesses.
From www.fundfund.cn detailed text reference: http://www.fundfund.cn/news_2008727_20316.htm