Capital Market for Dummies : Part 1

What is Capital Market?
> is a channel or facilities for movements of funds,
senang cerita dia macam tempat pertemuan antara yang sedang deficit dan surplus.
yang deficit perlukan modal untuk run business, while yang surplus nak generate more money through investments. So, akan terjadinya penjualan dan pembelian securities kat sini.

Terdapat 3 kategori Capital Market
1- Equity
  Nak tahu belian securities itu equity atau tak? equity akan melibatkan ownership
contoh Gamuda issue 100 lots stock (sebab nak funds- shortage), then ada yang akan beli the stocks (surplus) dan akan dapat keuntungan bila harga stock naik.
eg : shares/stocks, Unit Trusts, REITs, Index, Venture Capital, ETF, Structure Product...

2- Debt
  Berbeza dengan equity, debt ialah hutang bukan ownership. Jadi melalui pembelian derivatives seperti ini, biasanya akan dapat certificates I owe you.
contoh : Gamuda nak funds, instead of  issue stock, dia issue bonds, company A, B, C beli the bonds with certain price with coupon dan end of maturity period Gamuda akan beli balik the stocks.
maksudnya, Gamuda sebenarnya sedang berhutang kepada company A,B,C dan kene bayar every months kepada A,B,C sehingga maturity period.
eg : Private Debt Securities (PDS), Asset Backed Securitties (ABS)

3- Derivatives Instruments
eg : futures, option, swap, forward

Ok nak cerita pasal Derivatives dulu, sebab excited selama betahun jumpa future option segala tapi harini baru nampak applicationnya.

#Futures
When we hedge the current position to the future time by locking particular price.
contoh, we are company who manufacture soap, then received called from Hong Kong to order the soap in bulk and will be delivered on July (said now is Jan). The Hong Kong company request to have quoted price from us (soap company). However, Soap company cannot quote yet price because the soap main ingredients is palm oil which vary its price everyday. Because soap company only can process the soap 1 month before the delivery which is in June, soap company tatau what is the palm oil price during June. Tapi dah nak kene quote price to Hong Kong customer. Apa yang soap company boleh buat ialah pada Jan call Felda to lock price of palm oil for today which only be delivered on Jun. kenapa nak lock price? sebab besar kemungkinan harga palm oil akan naik pada June, soap company mungkin loss sedang dah quote price to Hong Kong masa Jan.

Illustration Price of CPO (Crude Palm Oil)
Jan : RM 3 / unit
June : RM 5/ unit

So if let say, harga CPO bulan June jadi RM 5, soap company can buy using locked price which is RM3 bukan market price. Tapi if let say harga on June lebih murah contoh RM 2.50, still kene bayar RM3 ikut locked price. Nampak macam rugi, tapi not cash loss, masih lagi untung dengan jual kepada Hong Kong.

# Option
Is the right to buy/sell, but not obligation to buy.
ada call option (right to buy) and put option(right to sell)

contoh : Nak beli kereta, tapi sekarang short of cash, next month (May) tahu dapat bonus. so, deal dengan car seller untuk buat option. Lepas car seller setuju, dia issue 1 paper kepada pembeli untuk tunjukkan right untuk beli kereta pada bulan May pada RM40K. Car seller akan jual the right dengan harga RM100. jadi sekarang pembeli kereta adalah the right holder. Ok pada bulan May, the right holder ada option sama ada nak beli atau pun taknak. Normally, option taknak beli sebab, right holder probably dah pergi kedai lain yang mana offer harga lebih murah contoh RM30K. Jadi dia sebenarnya untung (RM40K-RM30K-RM100(right charge)= RM9900). Ni contoh call option.

~ konsep macam khiyar, whereas ada pilihan untuk beli or cancel the contract in 3 days..pembeli ada pilihan..


fenatt..esok masih sekolah!