A Capital Market is a financial marketplace where buyers and sellers trade securities such as stocks, bonds, and other long-term investments. It plays a crucial role in channeling funds from investors to businesses, governments, and institutions that need capital for growth, development, or operations.
---
Types of Capital Markets:
1. Primary Market
New securities are issued for the first time (e.g., Initial Public Offerings - IPOs).
Companies raise funds directly from investors.
Example: A company selling shares to the public for the first time.
2. Secondary Market
Securities are traded among investors after being issued in the primary market.
Provides liquidity, allowing investors to buy and sell stocks easily.
Example: Stock exchanges like New York Stock Exchange (NYSE) or NASDAQ.
---
Key Instruments in Capital Markets:
1. Stocks (Equities): Represent ownership in a company and offer dividends or capital gains.
2. Bonds (Debt Securities): Loans made by investors to companies or governments with fixed interest payments.
3. Mutual Funds: Pooled investments managed by professionals.
4. Exchange-Traded Funds (ETFs): Funds traded like stocks but include diversified portfolios.
5. Derivatives: Contracts based on the value of underlying assets like commodities, currencies, or stocks.
---
Functions of Capital Markets:
1. Mobilizing Savings: Channels savings from individuals and institutions into productive investments.
2. Wealth Creation: Offers opportunities for investors to grow wealth through returns.
3. Liquidity: Ensures investors can buy and sell securities easily.
4. Economic Growth: Provides businesses and governments with the funding needed for expansion and development.
5. Price Discovery: Determines the value of securities through market demand and supply.
---
Examples of Capital Markets:
Stock Exchanges: NYSE, NASDAQ, London Stock Exchange, Bombay Stock Exchange (BSE).
Bond Markets: U.S. Treasury Bonds, Corporate Bonds, and Municipal Bonds.
---
Capital Market in Ethiopia:
Ethiopia is currently in the process of establishing its Capital Market Authority and launching a stock exchange to promote investment and economic growth. This initiative is part of Ethiopia's Homegrown Economic Reform to enhance financial inclusion and development.
Let me know if you'd like more details about Ethiopia's capital market reforms!
---
Types of Capital Markets:
1. Primary Market
New securities are issued for the first time (e.g., Initial Public Offerings - IPOs).
Companies raise funds directly from investors.
Example: A company selling shares to the public for the first time.
2. Secondary Market
Securities are traded among investors after being issued in the primary market.
Provides liquidity, allowing investors to buy and sell stocks easily.
Example: Stock exchanges like New York Stock Exchange (NYSE) or NASDAQ.
---
Key Instruments in Capital Markets:
1. Stocks (Equities): Represent ownership in a company and offer dividends or capital gains.
2. Bonds (Debt Securities): Loans made by investors to companies or governments with fixed interest payments.
3. Mutual Funds: Pooled investments managed by professionals.
4. Exchange-Traded Funds (ETFs): Funds traded like stocks but include diversified portfolios.
5. Derivatives: Contracts based on the value of underlying assets like commodities, currencies, or stocks.
---
Functions of Capital Markets:
1. Mobilizing Savings: Channels savings from individuals and institutions into productive investments.
2. Wealth Creation: Offers opportunities for investors to grow wealth through returns.
3. Liquidity: Ensures investors can buy and sell securities easily.
4. Economic Growth: Provides businesses and governments with the funding needed for expansion and development.
5. Price Discovery: Determines the value of securities through market demand and supply.
---
Examples of Capital Markets:
Stock Exchanges: NYSE, NASDAQ, London Stock Exchange, Bombay Stock Exchange (BSE).
Bond Markets: U.S. Treasury Bonds, Corporate Bonds, and Municipal Bonds.
---
Capital Market in Ethiopia:
Ethiopia is currently in the process of establishing its Capital Market Authority and launching a stock exchange to promote investment and economic growth. This initiative is part of Ethiopia's Homegrown Economic Reform to enhance financial inclusion and development.
Let me know if you'd like more details about Ethiopia's capital market reforms!