Glamor Economics

Chapter 178

Chapter 22 Section 7 Paradise for Long-Term Investors - Capital Market

The Dutch East India Company was the first company in the world to publicly issue shares. It issued shares worth 650 million Dutch guilders at the time, and set up offices in six port cities in the Netherlands, the most important of which was of course Amsterdam. The number of shares issued there accounts for more than 50% of the total.At that time, almost every Dutchman bought shares in the company, even the servant of the mayor of Amsterdam.

This is the early capital market.After several centuries of development, the scale of the capital market has expanded to a global perspective, and the capital market has formed a systematic theoretical system.

As we all know, Wall Street is no longer a simple street or an area, but a synonym for the world's financial center.The average daily capital circulation on this street is 2000 billion US dollars. Nearly a thousand of the world's largest financial institutions are located here. This is the core and most active place in the global capital market.If you want to understand the weight of the capital market, you can feel it in the beating numbers and hustle and bustle of Wall Street.

The capital market, also known as "long-term financial market" and "long-term capital market", is a place for various fund lending and securities transactions with a term of more than one year.The trading objects in the capital market are long-term securities of more than one year.Because long-term financial activities involve long-term funds, high risks, and long-term stable income, similar to capital investment, it is called the capital market.

Compared with the currency market, the main characteristics of the capital market are:
1. The financing period is long.At least a year or more, it can be as long as several decades, or even no expiration date.

2. Relatively poor liquidity.The funds raised in the capital market are mostly used to solve medium and long-term financing needs, so the liquidity and realizability are relatively weak.

3. High risk and high return.Due to the long financing period, the possibility of major changes is also high, and the market price is prone to fluctuations, so investors need to bear greater risks.At the same time, as a reward for risk, its return is also higher.

my country's typical representative capital market includes four parts: treasury bond market, which refers to treasury bonds with a maturity of more than one year and guaranteed by national credit, national key construction bonds, fiscal bonds, capital construction bonds, value-preserving public bonds, and special treasury bonds. The trading market; the stock market, including the stock issuance market and the stock trading market; the corporate medium- and long-term bond market and the medium- and long-term lending market. The capital suppliers in this market are mainly real estate banks and movable property banks.

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Participants in the capital market mainly include suppliers of funds and demanders of funds.The suppliers of funds in the capital market are various financial institutions, such as commercial banks, savings banks, life insurance companies, investment companies, trust companies, etc.The demanders of funds are mainly international financial institutions, government agencies of various countries, industrial and commercial enterprises, real estate operators, and sales finance companies that buy installment contracts from durable consumer retailers.

Types of capital market The capital market can be divided into primary market and secondary market: in the primary market, new capital-absorbing securities are issued and demanded by investors; in the secondary market, securities already issued change hands.

The treasury bond market is a market for the issuance and trading of treasury bonds, national key construction bonds, fiscal bonds, infrastructure bonds, value-preserving bonds, and special government bonds with a maturity of more than one year and guaranteed by national credit.

The medium and long-term lending market The capital suppliers in this market are mainly real estate banks and movable property banks; their funds are mainly invested in the renewal, expansion and construction of fixed assets of industrial and commercial enterprises; capital loans generally require fixed assets, land, buildings, etc. as collateral .

(End of this chapter)