“capital market” is broad and used to describe the in-person and digital spaces in which various

entities trade types of financial instruments.

Capital markets are the exchange system platform that transfers capital from investors who want to
employ their excess capital to businesses requiring capital to finance various projects or investments.

Capital markets are those where savings and investments are channeled between suppliers and those
in need. Suppliers are people or institutions with capital to lend or invest. They typically include banks
and investors.

Capital markets are used primarily to sell financial products such as equities and debt securities.

Equities are stocks that represent ownership shares in a company.

Debt securities such as bonds are interest-bearing IOUs.

These markets are divided into two categories:

Primary markets, where new equity stock and bond issues are sold to investors
Secondary markets, which trade existing securities

2 TYPES OF CAPITAL MARKETS

Equity securities are traded on the stock market and are essentially ownership shares of a business or
venture.

Debt securities are traded on the bond market and are IOUs that can come in the form of bonds or
notes.
-They essentially represent the borrowing of money that will be paid back at a later date with interest.

The securities can be bought and sold on two types of markets:

The primary market is when a company directly issues the securities in exchange for capital.
The secondary market is when the security holders trade with other investors in a transaction that is
separate from the issuing company.

PRIMARY MARKET
This market is sometimes referred to as the new issues market.

Small investors are often unable to buy securities on the primary market because the company and
its investment bankers want to sell all the available securities in a short period to meet the required
volume.

The secondary market has two categories: the auction and the dealer markets.

The New York Stock Exchange (NYSE) and Nasdaq are examples of secondary markets.

Other Financial Market

Foreign exchange (forex)
Commodities
Derivatives

Functions of a Capital Market

 Allocation of Capital
 Risk Management
 Price Discovery
 Facilitation of Economic Growth
 Liquidity Provisions

Allocation of Capital
-. Investors channel their savings into productive investments, enabling businesses to finance new
projects, research initiatives, and operational expansions.
-This allocation process fosters economic development by directing resources toward ventures with
the highest potential returns.

Risk Management
-offer diverse financial instruments, such as derivatives, which facilitate risk management for
investors and businesses.

Price Discovery
-serve as platforms for price discovery, where the forces of supply and demand interact to determine
asset prices.
-Accurate price discovery ensures that assets are fairly valued, fostering efficient resource allocation.

Facilitation of Economic Growth

-By connecting investors with capital-seeking entities, capital markets play a pivotal role in fostering
economic growth and innovation. Businesses utilize capital to fund research, develop new
technologies, and expand operations, driving productivity gains and job creation.
-access to capital enables entrepreneurs to pursue entrepreneurial endeavors, spurring
entrepreneurial activity and fostering a dynamic business environment.

Liquidity Provisions
-Capital markets enhance liquidity by enabling investors to buy and sell securities freely.
- Liquid markets ensure that investors can exit positions quickly and at fair prices, promoting market
efficiency and reducing transaction costs.

Association of Southeast Asian Nations -ASEAN

Capital markets represent a subset of financial markets

that specifically deal with the buying and selling of equity
and debt securities.

capital markets tend to focus on long-term instruments

Financial markets encompass both short-term and long-

term instruments.

Financial Market encompass a broader range of

activities, including commodity markets, derivatives
markets, and foreign exchange markets.
CHAP 2

Capital markets play a vital role in the economic development and

growth of a country,and the Philippines is no exception.

2 Primary Stock Exchange

the Philippine Stock Exchange (PSE)
the Philippine Dealing Exchange (PDEx).

The Philippine Stock Exchange (PSE) is the main stock

exchange where publicly traded companies list their shares.

The Philippine Dealing Exchange (PDEx) is focused on the

fixed-income market, facilitating trading in government and
corporate bonds.

The Philippine Futures Exchange (PFEX) facilitates trading in

financial derivatives, including stock index futures and options.

CAPITAL MARKET STRUCTURE

Stock Market
Bond Market
Derivative Market

The bond market in the Philippines is substantial and

Includes
government bonds
corporate bonds
retail treasury bonds.
REGULATORY FRAMEWORK
The Securities and Exchange Commission (SEC) is the primary
regulatory authority overseeing capital markets in the Philippines
-.It ensures that market participants comply with securities laws and
regulations, protecting investors and maintaining market integrity.

The Bangko Sentral ng Pilipinas (BSP), the central bank of the

Philippines, regulates the banking sector and plays a role in
supervising
financial institutions involved in capital market activities.

KEY PLAYERS
Investors: A diverse group of investors participates in the
Philippine capital markets, including individual retail investors,
institutional investors like mutual funds, pension funds, and foreign
investors.
Listed Companies: Publicly traded companies, both local and
foreign,list their shares on the PSE. Some of the largest and most
influential corporations in the Philippines are listed on the exchange.

Brokerage Firms: Brokerage firms act as intermediaries,

facilitating the
buying and selling of securities in the stock market. They play a
crucial
role in connecting investors with investment opportunities.
Brokerage firms play a pivotal role in connecting investors with
opportunities and
providing essential market insights, contributing to the growth of
capital
markets in the Philippines.

Investment Banks: Investment banks are involved in underwriting

and
arranging corporate bond issuances, initial public offerings (IPOs),
and
other capital-raising activities.

IMPORTANCE IN PHILIPPINE ECONOMY

Capital Formation: Capital markets provide a platform for
companies to
raise capital for expansion, infrastructure projects, and business
development. This, in turn, contributes to economic growth.

Diversification of Investment: Capital markets offer a wide range

of
investment options, allowing investors to diversify their portfolios
and
manage risk effectively.

Foreign Investments: The Philippines attracts foreign investors

through
its capital markets, which help in bridging the financing gap for
various
projects and stimulating economic activity
Government Financing: The government relies on the bond
market to
finance its budget deficits and fund critical projects such as
infrastructure
development and social services

Economic Stability: Well-functioning capital markets contribute to

economic
stability by providing liquidity and facilitating efficient price
discovery in
financial assets.

FUTURE OUTLOOK
a. Economic Growth: The Philippines has sustained a steady
economic
growth rate over the past, decade, driven by robust domestic
consumption, remittances from overseas Filipino workers, and a
resilient business process outsourcing industry.
-This growth provides a solid foundation for capital market
development.

b. Infrastructure Development: The Philippine government has

emphasized infrastructure development as a key priority.
Massive investments in transportation, energy, and other
infrastructure projects
create opportunities for the capital markets to raise funds and
support
economic growth

C. Market Reforms: The SEC and PSE are making changes to

enhance governance, attract investors, and increase market
liquidity. This includes improving market surveillance, disclosure
requirements, and corporate governance standards.
d. Demographic Dividend: The Philippines has a young and
growing
population, which creates a ready market for financial products and
services. As this population builds wealth and savings,the demand
for
investment opportunities in the capital markets is expected to
increase.
e. Financial Market Integration: The Philippines is actively
integrating its
capital markets into the global financial system through initiatives
like the
ASEAN Trading Link, connecting with Hong Kong and Singapore
exchanges.

CAPITAL MARKET
STRUCTURE: