Last minute stuff Flashcards
What are most corporate bonds issued as?
Debentures
What are debentures?
IOUs from the company
What sets out whether a charge is fixed or floating?
The deeb of debenture
What is a charge?
Collateral using an asset
What is a fixed charge
A charge over a defineable asset
What can’t a lender do to the fixed asset?
Cannot sell it (release it from its charge) without lender permission
How can a lender sell a fixed asset?
Offering to replace the charge with an equal or better asset
What can a lender do if the borrower defaults? (fixed charge)
1) Appoint a receiver and generate income
2) Take control and sell it
any excess from sale must be returned to company.
What is a floating charge
an equitable charge on the companies assets - present and future
Company can still use assets whlist under charge
Why is a floating charge useful?
can borrow without having to pledge specific securities (and be prevented from disposing of them)
What happens to a floating charge if the borrower defaults?
Fixes on their assets at that point
What ranks higher in liquidation? Fixed or floating charge
Fixed
What are the requirements for a main market LSE listing? (5)
1) £30m min market cap - 10% free float
2) £200k minimum bonds (if in issue)
3) Freely transferable securities
4) Statement of going concern
5) 3yr Trading History
What are the requirements for an AIM LSE listing?
1) Appoint a NOMAD
2) Appoint a nominated broker
3) Disclose price sensitive information to market
4) Publish annual and interim accounts within time frames
5) Disclose notifiable interest within 2 working days
What is a notifiable interest?
> 3% of a companies voting rights owned
Give 4 examples of types of dual listing
1) UK and US (Vodafone)
2) HK and UK (and US ADR) - HSBC
3) A Shares & H Shares in China
4) NYSE & Regional Exchange
Benefit of dual listing?
Why might this not be the case?
1) Improved liquidity
Most dual issues primarily trade on one market
What applies to companies dual listing in the US?
Sarbanes-Oxley (SOX)
What does SOX aim to do?
Protect consumers by improving the standard of corproate disclosures
What UK firms are subject to SOX?
Vodafone, Prudential, HSBC, Shell, BP.
Brazilian Index Name?
Bovespa
How many stocks on Bovespa?
What do the stocks on Bovespa Represent?
How often is Bovespa updated?
90 Stocks
80% of trading volume over past 12 months
Quarterly
Main Russian exchange?
Moscow Exchange Group
Merger between MICEX and RTS
What two things trade on MEG?
1) Equity (ETF, Shares, DRs) Settle T+2
2) Debt (Corp, Govt, Muni) T+0
What russian debt does not settle T+0?
OFZs : Ruble Denominated T Bills
MEG after 2022?
HMRC revoked RSE status
Two indian exchanges?
BSE
NSE - National stock exchange
BSE:
1) Oldest in Asia
2) Helped develop Indian Markest
3) >5000 companies
4) Sensex Index
BSE List requirements
1) 10 crore IPO
2) 3 crore follow up
3) 25 crore market cap
4) 10 crore min issue
NSE:
1) Automated / Screen Based
2) 2000 Listings
3) Equity + Debt & Expanded to derivative offerings
4) Nifty 50
National Securities Depository Limited (NSDL)
NSE helped create india’s first CSD
Two chinese markets?
SSE - shanghai
SZSE - shenzhen
A shares?
B shares?
H shares?
a shares - RMB denom, china resi’s only or QFII
b shares - foreign investors / resi’s with foriegn accounts
h shares - china companies listed on SEHK - trade in HKD
A+H shares common for dual listing
What does QFII stand for?
Qualified Foreign Institutional Investors
QFII?
single qfii cannot hold more than 10% (a share)
all qfii cannot hold more than 30% (a shares)
expanded in 2014 & 18
aim to increase foreign investment (increased quota)
2 south african exchanges?
JSE
ALT-X
JSE?
Established following gold rush
was open out cry
changed to ECN 1996
Equities, bonds, derivatives, commodities
400 companies JSE and Alt x
alt x?
South african
SMe / growth exchange
Benefits of EM investing?
1) Greater growth (have to catch up to DMs)
2) Diversifcation (globalisation)
3) Underpriced
4) Different industries
5) ineffcient pricing (mispricing)
Drawbacks / Risks of EM investing?
1) Volatility
2) Liquidity
3) Taxation
4) Repatriation
5) Lack of Regulation
6) Controls on foreign ownership
7) Settlement and Custody
8) Currency Risk
What is PIMFA
Personal Investment Management & Financial Advice Association
What is PIMFAs overall aim?
Create an optimal opearting environment
members can then deliver the best service to their clients to help saving and investment
PIMFA aims (6)
1) Represent the diverse range of firms by providing a unified voice
2) Provide leadership by consolidating knowledge and expertise
3) Create a culture of saving and investment in the UK
4) Lead debate on policy and regulation -> maintain UK as centre of exellence
5) Promote better understanding of sector -> help people invest for future
6) Develop best guidance for practice (through dialogue with stakeholders)
What is earnings yield?
A valuation measure
- high yield is overpriced
- low yield is underpriced
Market could expect high yield to have better growth & low yield to have poor future performance
What is dividend cover?
An affodability measure
Are the company paying a dividend out of earnings or reserves?
What is a good dividend cover?
Above 2 is considered prudential
What can a cap be thought as?
A call on interest rates
What can a floor be thought as?
A put on interest rates?
When would you use a cap?
Lending or borrowing @ floating rate - limit max interest payment
What are the benefits of a cap?
Limits highest level of borrowing / lending
Cost is known up front
When is a floor used?
Borrowing and want to guarentee a minimum level of return
Benefits of a floor?
Lowel levels of return known
Cost of protection is known
What is a bill of exchange?
An IOU from a customer to a supplier for goods
Promises to pay at a fixed future date
Guarenteed by a bank for a fee
Why does a bill of exchange need to be guarenteed?
Otherwise it is an IOU with no security / promise
Bank guarentee will ensure payment if the customer defaults
What is the process involved in a bill of exchange?
1) Supplier sells goods
2) Customer creates bill and gets guarenteed by bank for a fee
3) Customer gives supplier the note
4) Supplier can hold on to it and receive full amount in x days
5) Or sell it in money markets today for a discount
The buyer of the bill will receive the full amount at the future date instead.
What is behavioural finance?
A field of study which aims to explain investors decision making processes and actions (as well as the market as a whole)
It combined classical economics with psychology
What is the under pinning tenant of BF?
Investors are not rational
(opposite to what the EMH says)
What do irrationalities lead to?
Cognitive Biases
Which themselves lead to sub-conscious shortcuts (bad performance and decisions)
What are the 4 cognitive biases
1) Loss Aversion
2) Anchoring
3) Overconfidence
4) Herd Mentality
Loss Aversion
What it is:
What is causes:
How it is overcome:
Pain from loss 2x pleasure from a gain (equal amounts)
Investors hold onto losing investments
Overcome by not getting emotionally attached to investments
Overconfidence
What it is:
What is causes:
How it is overcome:
Investors exaggerate their ability / skills
Causes overtrading and undiversifeid positions
Overcome by investing more and trading less
Herd Bias
What it is:
What is causes:
How it is overcome:
Investors follow the popular decisions due to societal pressures
Makes bad decisions seem less incorrect
Self-discipline & conducting own research
