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Financial English
Unit 1:
Market Research
Unit 1:
Overview of Unit 1
Background information of Unit 1
Overview of Unit 1
 金融市场基本概念
 金融市场内的重要市场
 全球经济状况分析
Overview of Unit 1
After learning this unit, you should acquire:
What is financial market
What are the important components of financial market
Some basic concepts of financial market
The global economic situation nowadays
Background Information
金融市场(Financial Market)是资金供应者和资金需者者双
Background Information
Background Information
Background Information
资本市场( capital market ) 亦称“长期金融市
Background Information
Background Information
Background Information
Unit 1:
Part I:
Part II: 1.2 Analysis of Today’s Financial Markets
1.1 Financial Markets
Text :
Financial Market Research
1.1 Financial Markets
In economics, a financial market is a mechanism that allows
people to easily buy and sell (trade) financial securities (such as
stocks and bonds), commodities (such as precious metals or
agricultural goods), and other fungible items of value at low
transaction costs and at prices that reflect the efficient-market
Text :
Financial markets have evolved significantly over several
hundred years and are undergoing constant innovation to improve
Text :
Both general markets (where many commodities are
traded) and specialized markets (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 economy which relies primarily on
interactions between buyers and sellers to allocate resources is
known as a market economy in contrast either to a command
economy or to a non-market economy such as a gift economy.
Text :
In finance, financial markets facilitate –
The raising of capital (in the capital markets);
The transfer of risk (in the derivatives markets);
International trade (in the currency markets)
– and are used to match those who want capital to those who
have it.
Text :
Typically a borrower issues a receipt 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 dividends.
Text :
In economics, typically, the term market means the
aggregate of possible buyers and sellers of a thing and the
transactions between them.
Text :
The term "market" is sometimes used for what are more
strictly exchanges, organizations that facilitate the trade in
financial securities, e.g., a stock exchange or commodity
exchange. This may be a physical location (like the NYSE) or an
electronic system (like NASDAQ). Much trading of stocks takes
place on an exchange; still, corporate actions (merger, spinoff)
are outside an exchange, while any two companies or people, for
whatever reason, may agree to sell stock from the one to the other
without using an exchange.
Text :
Trading of currencies and bonds is largely on a bilateral
basis, although some bonds trade on a stock exchange, and
people are building electronic systems for these as well, similar
to stock exchanges.
Financial markets can be domestic or they can be
Text :
The financial markets can be divided into different subtypes:
Capital markets which consist of:
•Stock markets, which provide financing through the
issuance of shares or common stock, and enable the
subsequent trading thereof.
•Bond markets, which provide financing through the
issuance of bonds, and enable the subsequent trading
Text :
Commodity markets, which facilitate the trading of
Money markets, which provide short term debt financing and
Derivatives markets, which provide instruments for the
management of financial risk.
•Futures markets, which provide standardized forward
contracts for trading products at some future date.
Text :
Insurance markets, which facilitate the
redistribution of various risks.
Foreign exchange markets, which facilitate the
trading of foreign exchange.
The capital markets consist of primary markets and
secondary markets. Newly formed (issued) securities are bought or
sold in primary markets. Secondary markets allow investors to sell
securities that they hold or buy existing securities.
Text :
Without financial markets, borrowers would have difficulty
finding lenders themselves. Intermediaries 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.
Text :
More complex transactions than a simple bank deposit require
markets where lenders and their agents can meet borrowers and
their agents, and where existing borrowing or lending commitments
can be sold on to other parties. A good example of a financial
market is a stock exchange. A company can raise money by selling
shares to investors and its existing shares can be bought or sold.
Text :
The following illustrates where financial markets fit in the
relationship between lenders and borrowers:
Many individuals are not aware that they are lenders, but
almost everybody does lend money in many ways. A person
lends money when he or she:
•puts money in a savings account at a bank;
•contributes to a pension plan;
•pays premiums to an insurance company;
•invests in government bonds; or
•invests in company shares.
Text :
Companies tend to be borrowers of capital. When companies
have surplus cash that is not needed for a short period of time,
they may seek to make money from their cash surplus by lending
it via short term markets called money markets.
There are a few companies that have very strong cash flows.
These companies tend to be lenders rather than borrowers. Such
companies may decide to return cash to lenders (e.g. via a share
buyback.) Alternatively, they may seek to make more money on
their cash by lending it (e.g. investing in bonds and stocks.)
Text :
Individuals borrow money via bankers' loans for short term
needs or longer term mortgages to help finance a house purchase.
Companies borrow money to aid short term or long term cash
flows. They also borrow to fund modernisation or future business
Text :
Governments often find their spending requirements exceed
their tax revenues. To make up this difference, they need to borrow.
Governments also borrow on behalf of nationalised industries,
municipalities, local authorities and other public sector bodies.
Governments borrow by issuing bonds. Government debt
seems to be permanent. Indeed the debt seemingly expands rather
than being paid off. One strategy used by governments to reduce
the value of the debt is to influence inflation.
Text :
Municipalities and local authorities may borrow in their
own name as well as receiving funding from national
industries. These may include the postal services, railway
companies and utility companies.
Many borrowers have difficulty raising money locally
They need to borrow internationally with the aid of Foreign
exchange markets.
Text :
During the 1980s and 1990s, a major growth sector in
financial markets is the trade in so called derivative products, or
derivatives for short.
In the financial markets, stock prices, bond prices, currency
rates, interest rates and dividends go up and down, creating risk.
Derivative products are financial products which are used to
control risk or paradoxically exploit risk. It is also called
financial economics.
Text :
1.2 Analysis of Today’s Financial Markets--World
gripped by largest financial crisis in 100 years
Much effort has gone into the study of financial markets and
how prices vary with time. Charles Dow, one of the founders of
Dow Jones & Company and The Wall Street Journal, enunciated
a set of ideas on the subject which are now called Dow Theory.
This is the basis of the so-called technical analysis method of
attempting to predict future changes.
Text :
One of the tenets of "technical analysis" is that market trends
give an indication of the future, at least in the short term. The
claims of the technical analysts are disputed by many academics,
who claim that the evidence points rather to the random walk
hypothesis, which states that the next change is not correlated to
the last change.
Text :
The scale of changes in price over some unit of time is
called the volatility. The scale of change, or volatility, depends
on the length of the time unit to a power a bit more than 1/2.
Financial markets are merely tools. Like all tools they
have both beneficial and harmful uses. Overall, financial
markets are used by honest people. Otherwise, people would
turn away from them en masse. As in other walks of life, the
financial markets have their fair share of rogue elements.
Text :
Today’s financial crisis is described the current financial
crisis as an even that occurs once in 100 years. Indeed, the world
has not witnessed such a massive financial collapse for a very
long time already. The bankruptcy of Lehman Brothers will
become the largest bankruptcy in the corporate history of the
United States. USA’s largest insurance company, AIG, also stands
on the brink of collapse. It’s also reported that the market remains
in a state of shock, being unable to realize and cope with all
consequences of the recent events.
Text :
The decision of the US financial authorities not to render
support to Lehman Brothers means that the state virtually
makes the investment and bank sector to deal with its
problems alone. Furthermore, the decision of the Federal
Reserve System to keep the interest rate on the level of 2% is
another proof of the fact that the authorities are not ready to
take the risks of the system.
Text :
It became known that the FRS intended to conduct currency
interventions to maintain the liquidity of the market. The FRS
decided to invest the additional $50 billion in the national financial
system. Market members were 100% certain that the interest rate
would be reduced, thinking that the two measures would logically
supplement each other. As it turns out , they thought it wrong .
Text :
The bankruptcy of Lehman Brothers and the FRS decision
have aggravated the international crisis of liquidity even further.
The financial authorities of world’s largest countries took urgent
measures to hold multi-billion-dollar currency interventions on
their markets with a hope to avoid the crisis. Investors panicked
and started selling their shares, which made European and Asian
stock indexes drop by 2-5 percent.
Text :
It will obviously take long for the market to realize the
consequences of Lehman Brothers bankruptcy. The world
financial system will be different afterwards.
The Bank of Japan assigned $25 billion to maintain the
liquidity of the Japanese market. The government of the country
also held a special meeting with the participation of the chairman
of the nation’s central bank and ministers for economy and
finance. The meeting was held in connection with the
bankruptcy of Lehman Brothers.
Text :
The ministers decided to coordinate all further steps in the
financial field with the USA and the EU. The collapse of Lehman
Brothers will evince a restricted influence on the Japanese
financial market, although it does can affect the economy of
Japan on the whole in the future.
The stock indexes of Japan, Hong Kong, South Korea,
Taiwan and the Philippines dropped by over 4 percent.
Text :
The European Central Bank invested $70 billion euros, which
was 700 million euros more than the amount invested by the bank
on September 12, 2001 after the terrorist attacks in New York.
The Bank of England offered market members 20 billion
pounds, although the demand was evaluated at 60 billion.
Text :
The British FTSE dropped by 3.43 percent to 5025.60
points. The German index DAX Xetra 30 dropped by 1.57
percent to 5968.90. The French CAC 40 closed with a reduction
of 1.96 percent on the level of 4087.40. The composite
European index Dow Jones Stock 600 lost 2.64%, to 263.54
Text :
The Finance Ministry of the Russian Federation will assign
the additional 350 billion rubles to maintain the liquidity of the
Russian market. The bankruptcy of the USA’s fourth largest
investment bank and the collapse of the US financial market
triggered a sudden reduction of Russian stocks too.
Text :
The prices of Russia’s liquid shares reduced by 8-30.6
percent. RTS and MICEX, Russia’s two major stock
exchanges, were forced to close the tender one hour ahead
of scheduled time. The RTS index dropped by 11.47%, to
1131.12. The MICEX index reduced by 17.45%, to 881.17
points .
Such a large financial collapse has not been happening
in Russia after the default of 1998.
Text :
Russia’s Finance Ministry will reportedly assign 350 billion
more rubles to maintain the liquidity on the home market. The
total sum of the financial support thus makes up 825 billion
rubles or 33 billion dollars, which is quite comparable with the
amount invested by the US Federal Reserve System.
Text :
Russian experts say that the economic potential of the nation
will let the country survive the financial crisis without
considerable losses. The Russian economy today is a lot bigger
than it used to be ten years ago. Most likely, Russia will
experience a depression during two or three years. Others say,
though, that the growing bubble of Russia’s prospering oil
economy will begin to deflate.
Text : Language Points
n. An instrument or a process, physical or mental,
by which something is done or comes into being 机制
eg. planned economy and market mechanism
the price formation mechanism
transmission mechanism of monetary policy
Text : Language Points
n. A document indicating ownership or creditorship;
a stock certificate or bond.有价证券:标明所有权和债权的文件;
eg. listed security and unlisted security
analysis of security quotation
Text : Language Points
n. an article of trade or commerce, especially an
agricultural or mining product, that can be transported一种贸易或
eg. links of commodity circulation
process of commodity circulation
commodity circulation within commercial sector
Text : Language Points
a. returnable or negotiable in kind or by substitution
eg. Debt securities issued by the four statutory bodies or
government-owned corporations are fungible with Exchange Fund
Text : Language Points
n. A tentative explanation that accounts for a set of
facts and can be tested by further investigation; a theory.前提:对
eg. a working definition, hypothesis, theory
to assert as a hypothesis.
Text : Language Points
liquidity n. available cash or the capacity to obtain it on demand流
eg. Hong Kong’s financial markets are characterized by a high
degree of liquidity.
These bonds are largely held by financial institutions for trading
and liquidity management purposes.
Text : Language Points
v. to distribute according to a plan; allot 分配,分派
eg. They will allocate fund for housing.
We allocate 10% of revenue to publicity.
allocate of money for a particular purpose
Text : Language Points
gift economy
A gift economy is an economic system in which the
prevalent mode of exchange is for goods and services to be
given without explicit agreement upon a quid pro quo. Typically,
this occurs in a cultural context where there is an expectation
either of reciprocation—in the form of goods or services of
comparable value, or of political support, general loyalty, honor
to the giver, etc.—or of the gift being passed on in some other
manner. 礼品经济
Text : Language Points
v. to make easy or easier帮助, 促进
eg. Tractors and other agricultural machines greatly facilitate
These systems aim to protect and facilitate legitimate trade.
Text : Language Points
n. 红利, 股息; 债息; 利息; 被分成几股的一笔资金
eg. A stock price ex dividend.
These shares yield a dividend of 10%.
Text : Language Points
v. constituting or amounting to a whole; total聚集,
集合, 合计
eg. The money collected will aggregate a thousand dollars.
Text : Language Points
spinoff n. 将子公司股票分配给母公司股东
currency n. Money in any form when in actual use as a
medium of exchange, especially circulating paper money货币
Text : Language Points
a. Affecting or undertaken by two sides equally;
binding on both parties双边的,双方的:由双方共同影响或
eg. Among the 135 WTO members, 37 have requested for
bilateral talks with China.
Text : Language Points
intermediary n. acting as a mediator or an agent between persons
or things中间人; 媒介
eg. Conducts of intermediary institutions are being standardized to
better serve foreign invested enterprises.
Text : Language Points
n. a sum of money lent at interest.贷款:附利息借出的一
eg. Do you accept loan, both private loan and government - to -
government loan?
Text : Language Points
mortgage n. a loan of money which you get from a bank or a
building society in order to buy a house. 抵押
eg. to buy a house on mortgage/ to mortgage a house
lending policies of Mortgage Banks
Text : Language Points
n. The amount paid or payable, often in installments,
for an insurance policy.保险费
eg. You can pay either an annual premium of 360 or twelve
monthly premium of 32.
月的,每月付32英镑 。
Text : Language Points
tenet n. an opinion, doctrine, or principle held as being true by a
person or especially by an organization. 宗旨:一个人尤指一个组
eg. We shall pay you an agency commission of 5% on tenet value
of all sale against order received through you.
佣金 。
Text : Language Points
volatility n. something that is likely to change suddenly and
unexpectly. 短暂; 反复无常
eg. Volatility of capital flows can unsettle an otherwise perfectly
sound system, as we are vividly reminded by the recent turmoil in
the Asian currency markets.
Text : Language Points
en masse
adv. in one group or body; all together全体地, 一同地
eg. Prime Minister Yoshiro Mori's Cabinet resigned en masse
Tuesday morning, formally opening the way for Mori to announce a
new Cabinet that will oversee a sweeping restructuring of Japan's
Text : Language Points
share n. any of the equal parts into which the capital stock of a
corporation or company is divided. 股份:一个合作公司或公司的
eg. The company was formed with 200,0000 shares.
Text : Language Points
deflate v. To reduce the amount or availability of (currency or
credit), effecting a decline in prices.紧缩:减少(通货或信贷)
eg. to deflate the self-importance of.
The unforgettable debate quip that can deflate a candidacy is
the worst nightmare of any presidential hopeful.
Paraphrase the following expressions or abbreviations and
translate them into Chinese
1. security
6. share
2. commodity
3. liquidity
8. CEB
4. dividend
5. spinoff
10. CBRC
1. security: a document indicating ownership or creditorship;
a stock certificate or bond.有价证券:标明所有权和债权
2. commodity: an article of trade or commerce, especially an
agricultural or mining product, that can be transported一种
3. liquidity: available cash or the capacity to obtain it on
4. dividend: 红利, 股息; 债息; 利息; 被分成几股的一笔资
5. spinoff: 将子公司股票分配给母公司股东
6. share: any of the equal parts into which the capital stock of a
corporation or company is divided. 股份:一个合作公司或
7. NASDAQ : National Association of Securities Dealers
Automated Quotations全美证券商协会自动报价系统
8. NYSE: = New York Stock Exchange 纽约证券交易所
9. FRS: = Federal Reserved System 联邦储备系统
10. EU : =European Union 欧盟
Fill in the blanks with the proper words
concerned stock come up with
everyone economics
hand collapsed
The ________ financial crisis, brewing for a while, really
started to ________ its effects in the middle of 2007 and into
2008. Around the world ________ markets have fallen, large
financial institutions have ________ or been bought out, and
governments in even the wealthiest nations have had to
________ rescue packages to bail out their financial systems.
On the one hand many people are ________ that those
responsible for the financial problems are the ones being bailed
out, while on the other ________, a global financial meltdown
will affect the livelihoods of almost ________ in an increasingly
inter-connected world. The problem could have been ________,
if ideologues supporting the current ________ models weren’t so
vocal, influential and inconsiderate of others’ viewpoints and
The global financial crisis, brewing for a while, really
started to show its effects in the middle of 2007 and into 2008.
Around the world stock markets have fallen, large financial
institutions have collapsed or been bought out, and
governments in even the wealthiest nations have had to come
up with rescue packages to bail out their financial systems.
On the one hand many people are concerned that those
responsible for the financial problems are the ones being bailed
out, while on the other hand, a global financial meltdown will
affect the livelihoods of almost everyone in an increasingly
inter-connected world. The problem could have been avoided, if
ideologues supporting the current economics models weren’t so
vocal, influential and inconsiderate of others’ viewpoints and
Topic for discussion
Facing the economic crisis,
what do you think is the best
investment strategy?
1. Review the Text .
2. Keep in mind the special
terms learned in this Unit.
3. Do exercises in the book.