Revise Lecture 9

Q1: What is capital market?

Revise Lecture 9 Q2: What is primary and secondary markets?

Revise Lecture 9 Q3: What is IPOs?

Revise Lecture 9 Q4: What is Underwriter means?

Lecture 10 Capital Market Instruments

Revise Lecture 10 Q1: What is capital market and what are the main instruments of capital market?

Capital Market Instruments If a company needs to raise funds for the long- term, it can access the capital markets. The following are the different types of capital market instruments;

Capital Market Instruments 1.Bonds 2.Junk Bonds (unsecured) 3.Debentures / Loan notes (secured on an asset or by covenants) 4.Preference Shares traded on the main stock market 5.Shares in Alternative investment market - AIM

Revise Lecture 10 Q2: What is junk bond?

Capital Market Instruments Junk Bond: A bond with a credit rating BB or lower issued for leveraged buyouts and other takeovers by companies with questionable credit. The interest rate is higher in order to compensate holders for that risk. A bond rated usually BB or lower because of its high default risk. Also known as a High- yield bond.

Revise Lecture 10 Q3: What AIM?

Capital Market Instruments Alternative Investment Market – AIM AIM is a sub-market of the London Stock Exchange. It was founded on the idea of allowing smaller companies to float shares. Running since 1995, to replace the unlisted securities market with the object of allowing small growing companies to raise capital and have their shares traded in a market, without the expense of a full market listing.

Lecture 11 Financial Services

All types of activities which are of financial nature, could be brought under the term ‘Financial Services’. The term in a broad sense, means ‘mobilizing and allocating savings’. Thus, it includes all activities involved in the transformation of savings into investment.

Financial Services The financial services can also be called financial intermediation. Financial intermediation is a process by which funds are mobilized from a large number of savers and make them available to all those who are in need of them, particularly to corporate customers.

Financial Services Thus, the financial services sector is a key area and it is very vital for industrial developments. A well- developed financial services industry is absolutely necessary to mobilize the savings and to allocate them to various investable channels and thereby to promote industrial development in a country.

Financial Services Classification of Financial Services

Financial Services Classification of Financial Services: The financial intermediaries in Pakistan is traditionally classified into two; 1.Capital market intermediaries 2.Money market intermediaries

Financial Services Classification of Financial Services: The capital market intermediaries consist of the term- lending and the investing institutions which mainly provide long-term funds.

Financial Services Classification of Financial Services: The money market intermediaries consists of commercial banks, cooperative banks and other agencies which supply only short-term funds. However, the term ‘financial services industry’ includes all kinds of organizations which intermediate and facilitate financial transaction of both individual and corporate customers.

Financial Services Scope of Financial Services

Financial Services Financial services cover a wide range of activities. Their activities can be broadly classified into two, namely; 1.Traditional activities 2.Modern activities

Financial Services Traditional Activities: Traditionally, the financial intermediaries have been rendering a wide range of services encompassing both capital and money market activities. They can be grouped under two breaks 1.Fund-based activities 2.Non-fund based activities

Financial Services The fund-based activities include; 1.Underwriting or investment in shares, debentures, bonds etc. of new issues (primary market activities) 2.Dealing in secondary market activities. 3.Participating in money market instruments such as commercial papers, certificate of deposits, treasury bills and discounting bills. 4.Dealing in foreign exchange market activities

Financial Services The non-fund based activities: The non-fund based activities can also be called ‘fee based’ activities. Today, customers, whether individual or corporate are not satisfied with more provisions of finance. They expect more from financial service companies. Hence, a wide variety of services are being provided under this head, which include;

Financial Services 1.Management the capital issue, i.e. management of pre-issue and post-issue activities relating to the capital issue in accordance with the SECP guidelines. 2.Making arrangements for the placement of capital and debt instruments with investment institutions. 3.Arrangement of funds from financial institutions for the client ‘project cost or their working capital requirements’. 4.Assisting in the process of getting all government and other clearances.