EFI204 ANH VAN CHUYEN NGANH TCKT

1. FINANCIAL MARKETS
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Unit 5: Financial markets
UNIT OBJECTIVES - MỤC TIÊU
DURATION (9 periods) - THỜI LƯỢNG HỌC (9 TIẾT)
• Provide students with the language and knowledge related to the main types of financial markets.
Cung cấp cho sinh viên vốn ngôn ngữ và kiến thức liên quan đến các loại hình thị trường tài
chính cơ bản.
• Provide students with the language and method to write an argumentative essay.
Cung cấp cho học viên ngôn ngữ và phương pháp viết một bài bình luận.
• At the end of this unit, students will be able to talk and write about the main types of financial
markets, the main characters of each type and factors that affect the prices on financial markets.
Sau khi kết thúc bài học này, sinh viên có thể nói và viết về các loại hình thị trường tài chính
cơ bản, những đặc điểm của từng loại là gì và những nhân tố nào ảnh hưởng đến giá cả trên
những thị trường tài chính.
In this unit, we will learn language and knowledge related to
the main types of financial markets, the main characters of
each type and the factors that affect the prices on financial
markets.
Trong bài này, chúng ta sẽ học ngôn ngữ và kiến thức liên
quan đến các loại thị trường tài chính cơ bản, các đặc điểm
chính của từng loại và các nhân tố có ảnh hưởng tới giá trên
thị trường tài chính.
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Unit 5: Financial markets
Match each explanation in column A with its term in column B. The suggested
time for completing the exercise is 10 minutes
Column A Column B
1 Having a responsibility or an obligation to do something, e.g.
to pay a debt
A Assets
2 A person or an organization to whom money is owed (for
goods or services rendered, or as repayment of loan)
B Bankrupt
3 To be insolvent: unable to pay debts C Creditor
4 Everything of value owned by a business that can be used to
produce goods, pay liabilities, and so on to sell at the posses-
sions of a bankrupt business
D Dividend
5 To sell at the possessions of a bankrupt business E Founders
6 Money that a company will have to pay to someone else (bills,
taxes, debts, interest and mortgage payments, etc.)
F Liabilities
7 To provide money for a company or other project G Liability
8 Money invested in a possibly risky new business H Premises
9 The people who begin a new company I To liquidate
10 The place in which a company does business: an office, shop,
workshop, factory, warehouse, and so on to guarantee to buy
an entire new share issue, if no one else wants it
J To put up capital
11 To guarantee to buy an entire new share issue, if no one else
wants it
K Underwrite
12 A proportion of the annual profits of a limited company, paid
to shareholders.
L Venture capital
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Unit 5: Financial markets
Read the text and do the exercises below. The suggested time for reading the
text and completing the exercises is 30 minutes.
HOW INVESTMENT TAKES PLACE
How investment takes place
Afinancial market is a place where firms
and individuals enter into contracts to
sell or buy a specific product such as a stock,
bond, or futures contract. Buyers seek to buy
at the lowest available price and sellers seek
to sell at the highest available price. There
are a number of different kinds of financial
markets, depending on what you want to
buy or sell, but all financial markets employ
professional people and are regulated.
Stock markets
Stock markets grew out of small meetings
of people who wanted to buy and sell
their stocks. These men realized it was much
easier to make trades if they were all in the
same place at the same time. Today people
from all over the world use stock markets to
buy and sell shares in thousands of different
companies.
The act of issuing shares or stocks on the
stock market for the first time is known as
floating a company (making a flotation). In
America, new issues of stock must be regis-
tered with the U.S. Securities and Exchange
Commission and in some cases with the State
of New York. A prospectus, giving details
about a company's operation and the stock
to be issued is printed and distributed to
interested parties. Companies generally use
an investment bank to underwrite the issue,
i.e. to guarantee to purchase all the securities
at an agreed price on a certain day, if they
cannot be sold to the public.
Companies wishing to raise more money for
expansion can sometimes issue new shares,
which are normally offered first to existing
shareholders at less than their market price.
This is known as a rights issue. Companies
sometimes also choose to capitalize part of
their profit, i.e. turn it into capital, by issuing
new shares to shareholders instead of paying
dividends. This is known as a bonus issue.
Buying a share gives its holder part of the
ownership of a company. Shares generally
entitle their owners to vote at a company’s
Annual General Meeting (GB) or Annual
Meeting of Stockholders (US) , and to receive
a proportion of distributed profits in the form
of a dividend – or to receive part of the
company’s residual value if it goes into
liquidation. Shareholders can sell their shares
on the secondary market at any time, but the
market price of a share – the price quoted at
any given time on the stock exchange, which
reflects (more or less) how well or badly the
company is doing – may differ radically from
its nominal value.
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Unit 5: Financial markets
Futures markets
F utures markets provide a way for business to manage price risks. Buyers can obtain
protection against rising prices and sellers can obtain protection against declining prices
through futures contracts.
For example, in spring, farmer Jones planted 100 acres of
soybeans and he anticipates that in September he will harvest
5,000 bushels. He is concerned about what the prices of soy-
beans will be in September, if the price falls he will lose
money. To avoid this risk, farmer Jones has his futures broker
sell a contract for 5,000 bushels of soybeans for September at
the current price. In this way the farmer locks in his Septem-
ber selling price. If the price is higher in September, the
farmer will not make as much profit, but if the price has
fallen, he will come out ahead. This process of obtaining price
protection is called hedging.
To realize a profit, it is necessary to be right about both the direction and the timing of a price
change. Even experienced investors rarely invest more than a small portion of a total invest-
ment portfolio in futures contracts. In fact, in the last few years a number of large and so-
phisticated investors have made the front pages of newspapers for losing all of their money
on one kind of risky futures investment called a "derivative".
OTC-traded stocks
In the U.S., over-the-counter (OTC) trading in stocks is carried out by market makers that
make markets in OTC Bulletin Board. OTC stocks are not listed or traded on any stock
exchange. They are traditionally those of smaller companies that do not meet the listing
requirements of the New York Stock Exchange or the American Stock Exchange.
The OTC market presents investment opportunities
for informed investors, but also has a high degree of
risk. Many OTC issuers are small companies with
limited operating histories or are economically
distressed. Investments in legitimate OTC companies
can often lead to the complete loss of the in
vestment. Investors should avoid the OTC market
unless they can afford a complete loss of their
investment.
In recent years, however, many companies that qualify for listing have chosen to remain with
over-the-counter trading, because they feel that the system of multiple trading by many
dealers is preferable to the centralized trading approach of the New York Stock Exchange,
where all trading in a stock has to go through the exchange specialist in that stock. The
rules of over-the-counter stock trading are written and enforced largely by the National
Association of Securities Dealers (NASD) , a self-regulatory group. Prices of over-the-counter
stocks are published in daily newspapers, with the National Market System stocks listed
separately from the rest of the over-the-counter market. Other over-the-counter markets
include those for government and municipal bonds.
Source: From How Financial Markets Work, Resource Center, Investor Protection Bureau, US,
http://www.oag.state.ny.us/
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Unit 5: Financial markets
According to text A, which information below is true (T), false (F) or NG
(not given)?
Use the words provided (in the box) below to fill in the blanks
a. commodities b. financial securities c. market economy
d. specialized e. liquidity f. dividends
g. general h. intermediaries i. issues a receipt
j. raising of capital
In economics, a financial market is a mechanism that allows people to easily buy and sell
________(1)______ (such as stocks and bonds), _____(2)____ (such as precious metals or
agricultural goods), and other fungible items.
Financial markets have evolved significantly over several hundred years and are undergoing
constant innovation to improve _____(3)_____.
Both ____(4)___ markets (where many commodities are traded) and _____(5)______ mar-
kets (where only one commodity is traded) exist. Markets work by placing many interested
buyers and sellers in one "place", thus making it easier for them to find each other. An econ-
omy which relies primarily on interactions between buyers and sellers to allocate resources
is known as a ____(6)_____ in contrast either to a command economy or to a non-market
economy such as a gift economy.
Questions T/F/NG
1. Financial markets are classified according to the kinds of items/things sold
and bought on each of them.
2. Many people use the stock markets to make profits of their stocks/ shares.
3. Before issuing stocks/ shares, companies often hire professional people to
write the prospectus.
4. A reliable investment bank is often asked to underwrite the issue of stocks/
shares of a company.
5. In order to raise capital, companies use all of their profits to pay dividends.
6. Owning stocks/ shares of a company gives the owner only the dividend.
7. Futures markets are to protect buyers and sellers against dramatic changes
in prices.
8. To make profit on futures markets, an investor should have good sense of
prediction.
9. Companies listed on OTC market are always well-performed ones.
10. Investors prefer the OTC market as they are less formal and more profitable.
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Unit 5: Financial markets
In finance, financial markets facilitate the ______(7)_______ (in the capital markets); the
transfer of risk (in the derivatives markets); or International trade (in the currency markets)
and are used to match those who want capital to those who have it.
Typically a borrower ______(8)_______ to the lender promising to pay back the capital.
These receipts are securities which may be freely bought or sold. In return for lending money
to the borrower, the lender will expect some compensation in the form of interest or
_____(9)______.
Without financial markets, borrowers would have difficulty finding lenders themselves.
______(10)_____ such as banks help in this process. Banks take deposits from those who
have money to save. They can then lend money from this pool of deposited money to those
who seek to borrow. Banks popularly lend money in the form of loans and mortgages.
Read the text and do the exercises below. The suggested time for reading the
text and completing the exercises is 30 minutes.
FACTORS WHICH AFFECT MARKETS
Factors which affect markets
Up or down? Financial markets can be affected by a number
of factors which includes both subjective and objective ones.
Actions of investors: Individual, institutional and mutual fund
investors all affect the prices of stocks, bonds, and futures,
by their actions. For example, if a large number of people
want to buy a certain stock its price will go up, just as if many
people were bidding on an item at an auction.
Business conditions: Both the condition of an individual
business and the strength of the industry it is in will effect the price of its stock. Profits earned,
volume of sales, and even the time of year will all affect how much an investor wants to
own a stock.
Government actions: The government makes all kinds of decisions that affect both how much
an individual stock may be worth (new regulations on a business) and what sort of instruments
people want to be investing in. The government interest rates, tax rates, trade policy and
budget deficits all have an impact on prices.
Economic Indicators: General trends that signal changes in the economy are watched closely
by investors to predict what is going to happen next. Indicators include the Gross National
Product, the inflation rate (how quickly prices are rising), the budget deficit (how much the
government is spending) and the unemployment rate. These indicators point to changes in the
way ordinary people spend their money and how the economy is likely to perform.
International events: Events around the world, such as changes in currency values, trade
barriers, wars, natural disasters, and changes in governments, all change how people think
about the value of different investments and about how they should invest in the future.
Today, investments can be purchased around the clock. When the market opens in New York,
the Tokyo market has just closed and the London market is half way through its trading day.
When prices on one market change all other markets are affected.
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7. The bull and the bear
Abull market and a bear market are terms used to describe the
general market trends. A bull market is a period
during which stock prices are generally rising. A bear
market is a period when stock prices are generally falling. Each
of these markets is fueled by investors' perceptions of where the
economy and the market are going. If investors feel that they are in
a bull market, they will feel confident investing, adding to the
growth of the market. However, if investors think that the market is falling they will sell stock
at lower prices, continuing the bear market. These trends may quickly change.
Source: From How Financial Markets Work, Resource Center, Investor Protection Bureau, US,
http://www.oag.state.ny.us/
Read the text and answer the following questions
1. What will happen if the number of buyers for a certain stock suddenly increases?
2. If the EPS (earning per share) of a company is positively increasing, what will investors do?
3. What are affected by government’s decisions?
4. Which indicators of the economy do investors closely watch?
5. What do the economic indicators show?
6. What is the effect of changes in international events?
7. When do investments take place?
8. How are stock prices like in a bull market?
9. What happens if investors are in a bull market?
10. Does the period of a bull market or bear market last long?
Listen to a radio broadcast about the stock market TWICE and answer the
questions below
1. How does an English dictionary explain the phrase “to sell a bear”?
................................................................................................................
2. What are investors always concerned about?
................................................................................................................
3. What will happen when a company goes belly up?
................................................................................................................
4. What do investors want from a company whose stocks they own?
................................................................................................................
5. What does “windfall” mean?
................................................................................................................
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Unit 5: Financial markets
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Unit 5: Financial markets
Listen to the radio broadcast ONCE again and fill in the blanks below
Stock Market: The Business of Investing
Bells sound. Lighted messages appear. Men and women work at
computers. They talk on the telephone. At times they shout and
run around.
This noisy place is a ______(1)______. Here expert salespeople
called ____(2)_____ buy and sell shares of companies.
The shares are known as stocks. People who own stock in a com-
pany, own ______(3)_______.
People pay brokers to buy and sell stocks for them. If a company
earns money, its stock __(4)___ in value. If the company does not
earn money, the stock __(5)__ in value.
Brokers and investors carefully watch for any changes on the ____(6)______. That is the
name given to a list of stocks sold on the New York Stock Exchange.
Investors and brokers watch the Big Board to see if the stock market is a ____(7)______ or
a ____(8)______. In a bear market, prices go down. In a bull market, prices go up.
Investors in a bear market promise to sell a stock in the future ____(9)____. But the
investor does not own the stock yet. He or she waits to buy it when the ___(10)____.
Complete the passage below, using words from the box. The suggested time for
completing the exercise is 10 minutes
If you (1)…………. a business, the time often comes when you wish to expand it. To-do so,
you will need extra (2) ………… one way to get this is to (3) ……….... money from a bank.
The banks make a (4)……………to you, but you pay (5)…………… one the money it lands.
Another way is to ask the bank for an overdraft. If it agrees to give you one, you can the draw
out money up to a certain limit.
You may, however, not want to owe money to the bank. You
prefer not to be in (6)…………… In that case, you could
(7)…………. money by asking people to invest in your
business. In return for their investment, you would offer them
(8)………....…. in your business. Finally, if you need a lot
of money to (9) ……......……. Expansion, you may decide
to go public. When you do this, you usually lose some
(10)………… over your company.
4.1
3.2
borrow capital loan
finance control shares
own debt
raise interest
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Unit 5: Financial markets
4.2
Choose the most suitable words to fill in the blanks of the following sentences.
The suggested time for completing this exercise is 5 minutes
1. Offering shares to the public for the first time is called ______ a company.
A. loading B. uploading C. floating
2. A company offering shares usually uses a merchant bank to _____ the issue.
A. guarantee B. underwrite C. sponsor
3. The major British companies are ______ on the London Stock Exchange.
A. quoted B. posted C. uploaded
4. The price of a futures contract is determined ______ the contract is made.
A. before B. at the moment C. after
5. The value written on a share is its ______ value.
A. nominal B. normal C. norm
6. American corporations with large amounts of cash can spend it by _____ their own shares.
A. selling B. issuing C. buying
7. The majority of bonds has a ______ rate of interest.
A. fixed B. flexible C. floating
8. People who buy securities expect their price to rise so they can resell them before the next
settlement days are known as ______
A. bulls B. bears C. dark
Individual work
Based on the information in the two texts above, answer the following questions
in your own words
1. What is a financial market?
2. How is a company floated?
3. What is the advantage of futures markets?
4. What is the characteristic of OTC markets?
5. What factors affect financial markets?
Pair work or group work
Work with your partner(s) and discuss the following question.
If you possess a large amount of money, what are the advantages and disadvantages of the
following?
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Unit 5: Financial markets
Buying bond
Buying shares
taking all your money to Las Vegas
b
u
y
i
n
g
g
o
l
d
pulting it in a bank
investing in property or real estate
buying a lottery ticket
Buying a Van Gogh painting Put it under the mattress
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Writing an argumentative essay
A. Steps in writing an argumentative essay
- Identify your position: clearly state that you agree or disagree or maybe both agree with
this point and disagree with another point.
- Brainstorm ideas to support your opinion.
- Arrange your ideas into a logical order and put them in an outline.
- Write the first draft based on the structure of your outline.
-Read your first draft again, check for the unity and coherence of your writing. You can
change the order of ideas if necessary, or put in some more examples if it needs, or cross
out irrelevant sentences.
- Write the second draft.
- Edit your second draft: check all the spelling and grammatical mistakes…
- Now you can have your final draft.
B. Language for writing
Expressing your opinion
- I agree/ disagree/ go along/ do not go along with the idea that…
- I support the idea that…
- I am in favor of the idea of V-ing/ the idea that …
- In my opinion/ view, …
- I firmly believe that…
- It is evident that…/ No one can deny that…
- Personally, I think that…
- There is no doubt that…
Expressing summary
- To sum up/ In summary, …
- In short/ In brief,…
- I have come to the conclusion that…
Writing practice
Experts say investors should put all their money in only one kind of stock and
shouldn’t spread it over an investment portfolio (several kinds of stock). Do you
agree or disagree with this statement? Use specific reasons and examples to
write an essay to answer this question. The suggested time for completing the
exercise is 45 minutes.
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Unit 5: Financial markets
6.1
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12. English terms Vietnamese equivalents
A
- A bear market (n)
- A bonus issue (n)
- A bull market (n)
- A prospectus (n)
B
- Budget deficit (n)
D
- Dividend (n)
F
- Futures contract (n)
G
- Gross National Product (n) (GNP)
I
- Issuing shares/ floating a company (v)
N
- Nominal value (n)
- Thị trường giá giảm (do đầu cơ…)
- Sự phân phát cổ phần vô phí
- Thị trường giá tăng (trong đó giá các chứng khoán
hoặc hàng hóa có khuynh hướng tăng cao vì mua vào
nhiều, bán ra ít)
- Cáo bạch, tờ thuyết minh gọi cổ phần
- Thâm hụt ngân sách
- Cổ tức
- Hợp đồng (hàng hóa) kỳ hạn
- Tổng sản phẩm quốc dân
- Phát hành cổ phiếu
- Giá trị danh nghĩa
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Unit 5: Financial markets
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