san beda (overview to characteristics of stocks)

8/13/2019 San Beda (Overview to Characteristics of Stocks)

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Capital and Securities Market Prof. GERRY B. BADILLO, MBA


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DESCRIPTION AND RATIONALE

I. Introduction to Capital and Securities Markets

II. Familiarize the elements of Philippine Capital Markets

III. Class discussions based on case analysis and computations

GOALS AND OBJECTIVES

I. Familiarize the concept of Philippine Capital Markets

II. Understand the role of intermediaries and regulators

III. Obtain solid foundation and fundamental concepts of the capital market

IV. Familiarize the concept of stock valuation and analysis

V. Identify the advantages and disadvantages of investing in capital markets

STUDENTS DELIVERABLES Participation during class discussion and recitation

Group reporting

Visit either to BSP or PSE

Long Quizzes

Midterm and Final Exams


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STUDENTS DELIVERABLES

Participation during class discussion and recitation

During class recitation, students will be given chances to express what they learned aboutthe topic. Follow up question will be given to improve their grades.

A= 85 B= 80 C= 75

Group reporting

Based on content and relevance of the topic 60%

Punctuality 20%Manners in reporting 20%

Total 100%

Visit either to BSP or PSE

Long QuizzesMidterm and Final Exams


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Discipline inside the classroomClass shall start with opening prayerStudents shall adhere to express mutual respectIn expressing ideas or grievances, students shall not use defamatory languageCell phon es and o ther gadget s sha l l be turned off wh i le ins ide the c lass roomCopying, looking, and exchanging notes during examination shall be prohibited

Punctuality Expected to be in the classroom as scheduled,Submission of requirement as scheduled. Demerits will be imposed for late submission, to wit:

2 days delay - 5 points deduction1 week delay - 10 points deductionMore than one week delay - 5 points for every week of

delays

Inhibit to prepare assignments, take home quizzes and reports inside the classroom. Absences or tardiness equivalent to 11 hours before the midterm exam shall beautomatically dropped. Excuse letter shall be submitted prior to scheduled activities/commitment.

CLASSROOM RULES OF CONDUCT


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Name:

2X2 PHOTO

Surname First M.I.

Couse:

Section:

Date: RecitationGropupReport

Assignments Quizes Attendance

11/16/13

11/23/13

11/30/13 Bonifacio Day

12/08/13

12/15/13

1/5/2014

1/12/2014

1/19/2014

1/26/20142/2/2014

2/9/2014

2/16/2014

2/23/2014

3/2/2014

3/9/2014

STU ENTS MONITORING SHEET


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GRADING SYSTEM

BASE 5 GRADING SYSTEM


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I. Overview of Capital MarketII. The Philippine Capital MarketIII. Regulators and Functions

IV. Market IntegrityV. Characteristics of StocksVI. Investment PrinciplesVII. Trading PrinciplesVIII. Fundamental AnalysisIX. Technical Analysis

Outline


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A market in which individuals andinstitutions trade financial securities.Organizations/institutions in the public and

private sectors also often sell securities onthe capital markets in order to raise funds.Thus, this type of market is composed ofboth the primary and secondary markets.

CAPITAL MARKET


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CAPITAL MARKET A market in which individuals andinstitutions trade financial securities.Organizations/ institutions in the public

and private sectors also often sellsecurities on the capital markets in orderto raise funds. Thus, this type of market iscomposed of both the primary and

secondary markets. (invesotpedia.com)


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A market that issues new securities on anexchange. Companies, governments and othergroups obtain financing through debt or equity

based securities. Primary markets are facilitatedby underwriting groups, which consist ofinvestment banks that will set a beginning pricerange for a given security and then oversee its

sale directly to investors.

Primary Market


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Primary Market A market that issues new securities on anexchange. Companies, governments and othergroups obtain financing through debt or equity

based securities . Primary markets are facilitatedby underwriting groups , which consist ofinvestment banks that will set a beginning pricerange for a given security and then oversee its

sale directly to investors.


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A market where investors purchase securities orassets from other investors, rather than fromissuing companies themselves.

The Philippine Stock Exchange, Inc. , being theonly bourse in the country, commenced buying

and selling of securities via scripless trading.The Exchange performs both primary andsecondary market.

Secondary Market


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Secondary Market A market where investors buys and sellssecurities or assets from other investors , ratherthan from issuing companies themselves.

The Philippine Stock Exchange, Inc. , being theonly bourse in the country, commenced buying

and selling of securities via scripless trading.The Exchange performs both primary andsecondary market. (gbb)


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Stock MarketTo illustrate using equities market, suppose

ABE Co. decided to raise more funds byissuing 1 million new shares of stock forPhp100 per share. ABE Co. offers these sharesin the market and investors would purchasesportions of the offered for a total of Php100M.

Intermediaries will facilitate the marketing andregistrations of shares to settlement houses.This time, the investor obtains stock certificatesgiving him partial ownership of the company.

ABE Co. gets the Php100M in funds theywanted to raise.

Should this investor wish to no longer holdthese stocks, he can sell them to anotherinvestor in the stock market for the currentmarket price. Should the company have extracash, it could buy the stock back as well.

Bond MarketTo illustrate how a corporate bond movesthrough capital markets, suppose ABE Co.needs to raise Php10M. ABE Co. offers a 10-year bond on the bond market with a par valueof Php100.

Intermediaries will facilitate the marketing of

bonds. The bond is purchased by interestedinvestors, fund managers and corporationswishing to earn interest on the Php100 thatthey have subscribed.

ABE Co. receives the Php100M in cash andthe investor receives a bond and the promise of

repayment plus interest.

Should the bondholder later decide he nolonger wants the bond, he can sell it to anotherinvestor in the marketplace.


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BONDany interest-bearing or discounted government orcorporate security that obligates the issuer to pay

the holder a specified sum of money, usually atspecific intervals, and to repay the principal amountof the loan at maturity. The holder is a creditor ofthe issuer rather than a partial owner.

COMMERCIAL PAPERSshort-term obligations with maturities rangingfrom 2 to 270 days issued by banks,corporations, and other borrowers to investorswith temporary idle cash

TREASURY SHARESshares of stock which were previously issuedand fully paid, but subsequently reacquired bythe issuing corporation by purchase, redemption,donation, or through some other lawful means.

EXCHANGE TRADED FUND (ETFs) An Exchange Traded Fund or ETF is an open-end investment company that trades itsshares in the stock exchange.

SHARES OF STOCKS An instrument issued by the Company to itssubscribers as evidence of its indebtednessthrough equity raising.

Philippine Capital Market Instruments


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Why is there a needto regulate the capital market?

Because the business dealingsin a securities market

involve using

Other Peoples Money.


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Objectives of Securities Regulation

Protect the investors

Ensure that the markets are fair,efficient and transparent

Reduce systemic risk


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Pyramid of Regulation

3rd LevelSEC

1st Level :Individual Firms

2 nd Level:SROs

PSE and CMIC

2 nd Level: SROs - The PSE and Capital MarketIntegrity Corp (CMIC) comply and enforcecompliance to its members with the provisions ofthe SRC, its implementing rules and regulationsand the rules of the Exchange.

3 rd Level: Securities & Exchange Commission The Commission: (a) regulate, investigate, orsupervise the activities of persons to ensurecompliance; (b) supervise, monitor, suspend ortake over the activities of the Exchange andclearing agencies; and, (c) impose sanctions forthe violation of laws and the rules, regulationsand orders issued.

1 st Level : Individual Firms TheManagement of every Broker Dealerestablish and maintain an appropriateand effective compliance function withinthe firm which is independent of alloperational and business functions.


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What is market integrity?

It is the extent to which a marketoperates in a manner that is, and isperceived to be fair and orderly andwhere effective rules are in place andenforced by regulators so thatconfidence and participation in themarket is fostered.


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What is market integrity?

It is the extent to which a marketoperates in a manner that is, and is

perceived to be fair and orderly andwhere effective rules are in place andenforced by regulators so thatconfidence and participation in themarket is fostered.


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The Stock Market

a place where stocks are bought and sold.

The Philippine stock market is the place where people caninvest in publicly listed corporations.

On August 27,1927, The Manila Stock Exchange (MSE) was formed. Its operationwas suspended during the Japanese Occupation on 1940.

The MSE resumed its operation on 1946 after the Liberation.

On May 27,1963, The Makati Stock Exchange(MkSE) was organized and started itsoperation on November 6, 1965.

On July 14,1992, The PSE was incorporated with its objective to have one stablesecurities market.

On December 23, MSE and MkSE forged and issued a joint declaration on theunification of the country's two bourses under the Philippine Stock Exchange, Inc. toconsolidate logistics and hasten development of the capital market.


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Buying Client(Php) Selling Client

(Shares)

Broker(Executes Orders)

Broker(Executes Orders)

Settlement Banks(BDO, RCBC, MBTC) PDTC(Depository)SCCP

ClearingHouse

PDTC(Depository)

Settlement Banks(BDO, RCBC, MBTC)

Broker(Receives the Corresponding

Shares)

Broker(Receives the Selling

Proceeds)

Buying Client(Shares)

Selling Client(Php)

TRADING CYCLE

PsetradeSystem


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Financial Market

Money Markets

Bankaccounts

Treasurybills

CommercialPapers

Capital Markets

Bonds

Equities

Stock Marketwww.pseacademy.com.ph

Risk Pyramid


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BONDany interest-bearing or discounted government orcorporate security that obligates the issuer to paythe holder a specified sum of money, usually atspecific intervals, and to repay the principal amountof the loan at maturity. The holder is a creditor ofthe issuer rather than a partial owner.

COMMERCIAL PAPERSshort-term obligations with maturities rangingfrom 2 to 270 days issued by banks,corporations, and other borrowers to investorswith temporary idle cash

MONEY MARKET

the market of highly liquid, short-term fixed-incomeinstruments such as t-bills, commercial paper, andbank certificates of deposits

CAPITAL MARKETS

markets where capital funds are traded. Included areprivate placement sources of debt and equity as well asorganized markets and exchanges.

TREASURY SHARES

shares of stock which were previously issuedand fully paid, but subsequently reacquired bythe issuing corporation by purchase, redemption,donation, or through some other lawful means.

STOCK MARKETa place where stocks are traded to investors. It iscomposed of the primary and secondary markets. Twobasic types: organized securities exchange and over-the-counter market.


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FIXED INCOME INSTRUMENTS arethose that provide a return in the form offixed period payments and the eventualreturn of principal at maturity.

Examples are savings, Treasury bills,

and government bonds.

VARIABLE INCOME INSTRUMENTS are those that provide a return based onan underlying measure such as short-term interest rates.

www.pseacademy.comph

Fixed Income vs. Variable


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shares of ownership in a corporation

buyer of stock =stockholder/shareholder

stockholder/shareholder = part owner

participates in the companys growth

and future profits/losses

equities or shares

Stocks


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Class A

Class A stocks are shares that can bebought or sold solely by Filipinoinvestors.

Class B

Class B stocks are shares that can bebought or sold by both Filipinos andforeign investors.

WARRANTS

refers to a derivative instrument whichgrants the holders the right but not theobligation to buy (in the case of a call

warrant) or sell (in the case of putwarrant) a stated number or shares ofstock at a specified price and at a specifictime in the future.

Philippine Deposit Receipts (PDR)

a security which grants the holder theright to the delivery of sale of theunderlying share. PDR are not

evidences or statements norcertificates of ownership of acorporation.

TYPES OF SHARES OF STOCKS


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PREFERRED STOCK

in event of liquidation, shareholdershave priority over commonshareholders

has fixed/guaranteed dividend

no voting rights

COMMON STOCK

in the event of liquidation, commonstockholders have rights to the companys assets only after debts and preferredstockholders have been paid in full

shareholder exercises control by electingboard of directors and voting on corporatepolicies or matters

www.pseacademy.com.ph

According to Rights


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Blue Chip stocksThese are stocks of stable, profitable, andwell-known public companies, and have a longhistory of steady revenues and dividendpayments.

Income stocksUsually blue chips but may also includesmaller companies.

Growth stocksDont usually pay dividends; reinvest earningsto fuel expansion projects.

Defensive stocksProvide constant dividend and stable earningseven during adverse market conditions.

According to Characteristics

Cyclical stocksThese companies produce or offer services that arelow in demand during slowdown and increaseswhen business peaks.

Speculative stocksThose that rise quickly when economic growth isstrong and falls rapidly when growth is slowingdown.

san beda (overview to characteristics of stocks)

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