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Phil. market

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  • 1. THE PHILIPPINE FINANCIAL MARKET (A General Overview)
  • 2. Learning outcomes
    • Financial Institutions & Intermediation
      • describe the functions of a financial institution
      • classify the different types of financial institutions
      • identify and distinguish the predominant types of financial institutions
  • 3. Learning outcomes
    • The Financial Market
      • identify the different segments of the financial market
      • describe the money market
      • discuss the different instruments traded in the money market
      • define the capital market
      • discuss the different segments and instruments of the capital market
  • 4. FINANCIAL INSTITUTIONS & INTERMEDIATION
  • 5. Financial intermediation
    • is the process of acquiring funds from surplus economic units for the purpose of making available such funds to deficient economic units
  • 6. Financial Institutions Savers Users of funds Invests money/ purchases securities Lends money/ purchases securities
  • 7. Sources and Users of Funds
    • Sources
    • Individuals
    • Institutional Funders
    • Users
    • Corporations
    • Government
  • 8. Financial institutions: Intermediaries
    • facilitate the intermediation process
    • gather funds in quantities & at terms that are acceptable to savers
    • supply funds in quantities and at terms agreeable to users
  • 9. Types of financial institutions
    • Private Banks
    • Specialized Gov’t. Banks
    • Private Non-Bank Financial Intermediaries
    • Gov’t. NBFIs
  • 10. Banks
    • Private Banks
      • Commercial banks (KBs)
      • Universal banks
      • Thrift banks
      • Rural Banks
    • Specialized Gov’t. Banks
      • Development Bank of the Phils.
      • Land Bank of the Phils.
  • 11. Commercial banks
    • accept demand deposits subject to withdrawal by checks and other types of deposits
    • , drafts, bills of exchange, buy and sell foreign exchange, lend money and acquire readily marketable bonds
  • 12. Universal banks
    • expanded KBs
    • takes on the functions of KBs and investment houses
    • can underwrite securities
    • act as selling agents for commercial papers
    • can own up to 35% of non-allied undertakings
  • 13. Development banks
    • are banks organized principally to help finance development undertakings in agriculture and industry through the extension of medium to long term loans (agri-related loans, loans to SME)
  • 14. Non-bank financial intermediaries
    • Private NBFIs
      • Investment houses
      • Finance companies
      • Investment companies
      • Securities dealers
      • Securities brokers
      • Insurance companies
      • Pawnshops
      • Savings & Loan Asso.
    • Government NBFIs
      • Social Security System (SSS)
      • Government Service Insurance System (GSIS)
      • National Dev’t. Corporation (NDC)
      • National Home Mortgage Finance Corp.
  • 15. Quasi-banks
    • could borrow from 20 or more lenders for the borrower’s own account for the purpose of relending or purchasing receivables or other obligations
    • issues deposit substitutes:
      • PNs
      • certificates of assignment with recourse
      • repurchase agreements
  • 16. Investment houses
    • underwrite debt and equity issues and medium to long-term financing
    • offer advisory and related services in connection with corporate mergers, acquisitions and restructuring
  • 17. Regulators
    • Bangko Sentral ng Pilipinas
    • Securities and Exchange Commission
    • Bureau of Internal Revenue
    • Bureau of Treasury
  • 18. THE FINANCIAL MARKET
  • 19. The Financial Market
  • 20. Money market
    • a vehicle for mobilizing short term funds which can be accessed by borrowers at a relatively short period of time;
    • a system comprising of a network of dealers intermediating between suppliers and users of short term funds; and
    • a structure revolving around the trading of short term fixed income instruments issued by corporations., financial institutions and the government
  • 21. Capital market
    • portion of the financial sector involved in: one, the mobilization and intermediation of private savings; and two, the allocation of medium and long term financial resources through a variety of debt and equity instruments for both private and public sector domestic investment.
  • 22. Capital market components
    • Non-securities market
      • provides non-negotiable instruments to fund medium to long term projects (i.e MTLs)
    • Securities market
      • provides medium to long-term to project proponents through the latter’s issuance of negotiable debt instruments or equity shares
  • 23. Capital market instruments
    • Debt issues
      • are evidence of indebtedness issued by either the gov’t. or private corporations
      • they could have a specified maturity or an indefinite maturity in the case of consols
      • could have fixed or floating rates
      • are either issued to the public or issued on a private placement basis
  • 24.
    • Equity issues
      • equity share issuance is an alternative method of raising capital funds
      • a corporation can issue either common or preferred shares.
  • 25. THE PHILIPPINE STOCK MARKET
  • 26. History
    • Started in 1927 by 5 Manila Businessmen
      • Called the Manila Stock Exchange
    • 1963, Makati Stock Exchange was organized
    • July 14, 1992 – Philippine Stock Exchange was incorporated (uniting Manila and Makati Stock Exchanges)
    • Right now there are 150 local and 34 foreign trading participants called STOCK BROKERS
    • As of date, there are 249 firms that are listed in PSE
  • 27. Role of the PSE
    • PSE is a private, non-profit and non-stock organization created to provide and maintain FAIR, EFFICIENT, and orderly market for the purchase and sale of securities
    • Brings together companies who would want to raise capital through issuance of new securities
    • Facilitate buying and selling of shares
    • Contributes to the growth of the economy
  • 28. Securities listed in the PSE
    • These are the types of securities that you can buy from the Phil. Stock Exchange
      • Common Stocks
      • Preferred Stocks
      • Warrants
      • Philippine Deposit Receipts (PDRs)
      • Small Denominated Bonds (SDTs)
  • 29. What are securities? Stocks?
    • Securities are proof of one’s ownership or indebtedness in a company. (ex: TBills, FXTN, & other securities traded in the money market.
    • Stocks are shares of ownership in a corporation (you become part-owner)
  • 30. Interpreting Stock Information
  • 31. Minimum Amount of transaction
  • 32. Some Popular Companies Listed in PSE
  • 33. Procedures in Buying/Selling
    • Choose a stockbroker
    • Open account with the broker
    • Instruct buy/sell order to the broker (amount & price)
    • Buying
      • Pay broker (amount plus fees)
      • Broker to transfer securities in the depository of the investor
    • Selling
      • Seller’s depository account will be deducted
      • Received proceeds from brokers (amount less fees)
  • 34. Procedures in Buying/Selling
  • 35. Transaction Fees FEES/TAXES SELLER BUYER a.  Brokerage Commission (maximum of 1.5% of transaction cost + 12% VAT) X X b.  SCCP Fee of 0.0001 x value of transaction X X b.  Transfer Fee of Php 100.00 + 12% VAT   X d.  Cancellation Fee of Php 20.00 + 12% VAT X   e.  Stock Transaction Tax (½ of 1% value of transaction in lieu of capital gains tax) X  
  • 36. Sample Transaction
    • Mr. X wishes to buy a stock whose market price is P10.00. Based on the Board Lot Table, the minimum number of shares he can buy at a regular transaction is 1,000 shares (a). In this case, the amount that he needs is about P10,000.00 plus charges. His required cash outflow will be as follows:
    Market price/share P 10 Minimum number of shares x 1,000 P 10,000.00 Broker's Commission (1.5% + 12% VAT) + 168 Transfer Fee + 12% VAT + 112 SCCP Fee + 1 Total Cash Outlay P 10,281.00
  • 37. Sample Transaction
    • Mr. Y wishes to sell a stock whose market price is P5.00. Based on the Board Lot Table, the minimum number of shares he can sell at a regular transaction is 1,000 (b). In this case, the proceeds of the sale is about P5,000.00 less charges. His cash inflow will be as follows:
    Market price/share P 5 Minimum number of shares x 1,000 P 5,000.00 Broker’s Commission (1.5% + 12% VAT) - 84 Stock Transaction Tax - 25 PCD and SCCP Fees - 0.5 Cancellation Fee + 12% VAT - 22.4 Net Cash Receivable P 4,868.10
  • 38. How do people profit in the Stock Market?
    • Capital gains
    • Cash Dividend
    • Stock Dividend
    • Stock Rights
  • 39. Some Risks Related to Investing in the Stock Market
    • Financial Risk
    • Interest Rate Risk
    • Market Risk
    • Political Risk
    • Emotional Risk
  • 40. Tips in investing in the Stock Market
    • The money you invest in the stock market should be your excess cash which you are willing to lose!
    • Since Stock Market is subject to volatilities, you should be able to allocate time to monitor your investments
  • 41. Thank You