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Phil. market

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Phil. market

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

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