Securities market. Lecture 1.

Kairlenov M.A.

Financial Assets

An asse ta

Financial Assets

Price & r T

The Financial System

Refers to the collection of institutions by which financial assets are created and traded. Function of Financial System: 1.Improve allocation of capital: transfer capital from savers (investors) to capital users (usually corporations). 2.Improve allocation of risk: Risk transfer, sharing, and management. Reduction of riskbearing by repackaging risks. 3.Consumption timing: allow investors to smooth consumption inter temporally. 4.Separation of Ownership and Management 5.Discipline investment decisions by firms.

Financial system of Kazakhstan: general view Financial system on the basis of distribution channels of financial resources
Economical subjects with proficiency of financial resources Second Tier Bank (given loans) Accumulative pension funds (growth accumulations during a year) Insurance companies (insurance premiums withou reinsurance abroad) Total financial institutions Share of financial institutions Primary placement corporate bonds on KASE Share of securities market Expenditurs of State Budget Share of State Budget Total financial system Total financial system as percent of GDP
Source: calculate author by data of NB RK, Ministry of finance

Financial institutions Securities market States financial system

Economical subjects with deficit of financial resources

2007 2008 2009 2010 9 644 5 925 4 102 3 794 298 212 440 398 90 10 032 77% 284 2% 2 678 21% 12 994 101% 82 70 87

6 219 4 612 4 279 65% 53% 49% 4 426 86 0% 5% 1% 3 394 3 747 4 457 35% 43% 51% 9 616 8 785 8 821 60% 55% 41%

Financial Markets
Why have financial markets? buyers and sellers come together and determine price (value) of financial assets price is a signal about value and changes in value, and how funds should be allocated easier to buy and sell -- liquidity this makes financial assets more popular, and funds more available liquidity varies across different markets reduces transactions costs reduces search time for buyer and seller reduces need to independently gather information--it is reflected in the price of an asset So, financial markets yield information, liquidity, and cost efficiency and Affect personal wealth Affect firms profit and investment -> employment

Financial Markets
Stock market DJIA in 1950-2005 years

Classification of financial markets

type of assets: debt vs. equity market maturity of assets money market: short-term debt securities capital market: long-term debt or equity securities delivery of assets cash/spot market: asset exchange immediately after trade (2 days) derivative market: asset exchange occurs on future date after trade (months) age of asset primary market: exchange of newly issued securities secondary market: exchange of previously issued securities structure of market exchange: buyers and sellers meet in physical location to trade over-the-counter (OTC) market: buyers and sellers linked through dealers and geographically dispersed

Main segments of financial system: securities market 2008 2009 2010

Quantity of operating share issues and joint-stock companies 2240 Quantity of operating issues of bonds 347 Volume of operating issues of bonds, trln.KZT 2,1 2196 2170 395 388 5,2 6,2

From 2170 of operating joint-stock companies in the country only 64 place it on KASE; As a whole on KASE there are 114 emitters that released 508 number of issue. The volume of trade on the secondary market still decreasing from T1.4 trln. in 2007 to T0.4 trln. In 2010. Rapidly growth the number of individual accounts from 4.7 thousands in