Exam #1 Flashcards
Two types of investors:
- Retail investors
- Institutional investors
any issuance succeeding the IPO
secondary public offering
Where does IPO and 2PO raised?
primary market
It is where the trades are made
secondary market
firms that provide financial services and advice to their clients
Financial institutions
Salient points of financial institution definition
- Provide financial services
- Advice clients
- Regulated by laws
3 Roles of Financial Institutions
- Act as intermediary between the capital and debt markets
- Responsible for the transfer of funds from investors to companies
- Key entities that control the flow of money in the economy
Types of financial institutions
- Banks
- Credit unions
- Stock brokerage
- Asset Management firms
- Insurance companies
- Finance companies
- Remittance companies
- Trust companies
- FOREX
Minimum amount to have your money managed in asset management firms
20 million
In this financial institution, money that is lent out is contributions.
Financial companies
This is different from assurance companies.
Insurance companies
3 people involved in trust companies:
- Trustee
- Trustor
- Beneficiary
The collection of foreign currency that a country holds
Gross International Reserves
4 phases of business cycle
- Prosperity
- Recovery
- Recession
- Depression
a class that best gauge of economic activity
middle class
they bridge the gap between borrowers and issuers of bonds
credit-rating agencies
This contributed to the growth of consumer loans in the country and will be felt in the long run
investment grade ratings
it provides job opportunities and compensation
stability in the economy
There will be challenges that will come along the way that will test the resilience of the Philippine economy but the ________ will buoy the economy
strong economic fundamentals
Tiger Cub Economies
Indonesia, Malaysia, the Philippines, Thailand and Vietnam
Rapid and sustained poverty reduction
Inclusive growth
allows people to contribute to and benefit from economic growth
inclusive growth
rapid pace of growth is unquestionably necessary for substantial poverty reduction, but for this growth to be sustainable in the long run, it should be broad-based across sectors, and inclusive of the large part of the country’s labor
inclusive growth
implies a direct link between the macro and micro determinants of growth
inclusive growth
8 indicators of inclusive economic growth
- Reduced poverty and inequality
- economic growth and employment
- key infrastructure endowments
- access to education and health
- access to basic infrastructure utilities and services
- gender equality and opportunity
- social safety nets
- good governance and institutions
It captures the importance of structural transformation for economic diversification and competition, including creative destruction of jobs and firms
micro dimension
Ways that companies raise funds
- finance capital expenditures (acquisitions, investments)
- working capital
- pay off/refinance existing debt
the stock exchange of the Philippines
PSE - Philippine Stock Exchange
an organized market for tradable stocks and where brokers and traders buy/sell stocks
Stock Exchange
main index of the PSE and represents the general trend of the market
PSEi
How many companies in the PSEi
30 most active companies
Considerations of PSEi
- public float
- liquidity
- market capitalization
what do you call those companies not included in PSEi
All shares
(Sector indices)
Financials
BDO
BPI
MBT
(Sector indices)
Industrials
MER
PCOR
URC
JFC
(Sector indices)
Holding firms
AC
AEV
SM
JGS
(Sector indices)
Property
ALI
SMPH
MEG
(Sector indices)
Services
ICT
GLO
TEL
ABS
(Sector indices)
Mining and Oil
NIKL
PX
LC
operating members are entitled to how many trading booth
1 only
Why buy stocks?
- Capital appreciation
- Ownership in the business
- Claim
How do companies issue stocks?
- Initial public offering (IPO)
- Secondary public offering (2PO)
- Stock Rights Offering (SRO)
Classification of stocks
common stocks
preferred stocks
warrants
3 types of dividends
Cash dividends
Stock dividends
Property dividends
date of announcement of dividends
Dividend declaration date
the day that will not entitle a buyer to receive a dividend
Ex-dividend date
the date when the company verifies who are entitled to receive the dividends
Record date
Dividend is credited to the trading accounts
Payment date
PSE uses what type of trading
scripless trading
Type of trading in which settlement is done via the book-entry system (no physical transfer of certificate) thru Philippine Central Depository (PCD)
Scripless trading
Stock certificates have to be lodged to be traded in the exchange
First consideration when buying a stock
choosing a stock broker
Settlement date
T + 2
(T - transaction date)
Seller receive their proceeds, when?
after 2 working days
3 institutions that play an important role in the settlement cycle
- Securities Clearing Corporation of the Philippines
- Settlement Banks
- Philippine Depository and Trust Corporation (PDTC)
agency that facilitates stock clearing and settlement
Securities Clearing Corporation of the Philippines
maintains cash accounts
Settlement banks
responsible for safekeeping and overseeing of securities for clients
Philippine Depository and Trust Corporation (PDTC)
Types of Orders based on lot size
- Normal lot
- Odd lot
- Board lot
(Type of orders)
within the board lot table
normal lot
(type of orders)
less than the normal unit of trading
Odd lot
(type of orders)
large number of shares traded at an arranged price between two parties (at least 5M pesos)
Board lot
Investing Procedures (5)
- Choose a broker
- Open an account
- Give your order
- Pay your settlement date
- Receive your proceeds/shares
the maximum and minimum price of the stock for the day
Trading threshold
maximum gain
50%m
maximum loss
40%
Orders that exceed the trading band are automatically rejected, EXCEPT when:
- the stock was suspended for at least a year
- listing by way of introduction (first day only)
2 ways to measure thresholds
- Dynamic threshold
- Static threshold
Classes under dynamic threshold
Class A - below 20 tranx in a month (20%)
Class B - 20 to 500 (15%)
Class C - 501 and above (10%)
What is the difference between the selling transaction and buying transaction?
Stock transaction tax is levied to the seller, not the buyer
Different types of orders
- Market Order
- Limit Order
- Day Order
- Good Till Cancelled (GTC)
- Stop Loss Order
(type of order)
buy or sell immediately at the best available price
Market order
(type of order)
Sets the max/min price at which one is willing to buy/sell stock
Limit order
(type of order)
An order valid for that day
Day order
(type of order)
order remains open in succeeding trading days until it is finally executive or cancelled
Good TIll Cancelled (GTC)
(type of order)
to limit an investor’s loss on a position
can be a day order or GTC
Stop Loss Order
Plan that fits your own goals and risk tolerance and should be realistic
Trading plan
Styles as a trader
- Position traders
- Swing traders
- Day traders
(trader)
medium to long term
Position traders
(trader)
buy on oversold levels and sell on overbought levels
Swing traders
(trader)
frequent buying and selling
Day traders
2 approaches to fundamental analysis
- Top down approach
- Bottom up approacj
3 Factors/considerations in Company Analysis
Sensible business plan
Solid management
Financial analysis
Ratios do not mean anything until they are compared to:
- Historical or future data
- Industry or sector average
- Competitors
The field of technical analysis is based on 3 assumptions
- market discounts everything
- price moves in trends
- history tends to repeat itself
(company analysis)
A competitive advantage
Sensible business plan
(company analysis)
Well-managed track record
Solid management
(company analysis)
Sound financials, great potential earnings
Financial analysis
What is given in scripless trading when you buy a stock?
Statement of Account
Settlement done via the book-entry system thru _________
Philippine Central Depository (PCD)
