Difference Between Money Market and Capital Market
Thursday, September 24, 2009
Capital Market is term used for the physical trading of capital instruments like equities, bonds, derivatives etc. This market always physically exists and the best example is Stock Exchange.
A capital market is a market for securities (both debt and equity), where business enterprises (companies) and governments can raise long-term funds. It is defined as a market in which money is lent for periods longer than a year[1], as the raising of short-term funds takes place on other markets (e.g., the money market). The capital market includes the stock market (equity securities) and the bond market (debt). Financial regulators, such as the UK's Financial Services Authority (FSA) or the U.S. Securities and Exchange Commission (SEC), oversee the capital markets in their designated jurisdictions to ensure that investors are protected against fraud, among other duties.
Capital markets consist of the primary market and the secondary market. The primary markets are where new stock and bonds issues are sold (via underwriting) to investors. The secondary markets are where existing securities are sold and bought from one investor or trader to another, usually on a securities exchange, over the counter, or elsewhere.
Hope this clarifies
The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend. Participants borrow and lend for short periods of time, typically up to thirteen months. Money market trades in short-term financial instruments commonly called "paper." This contrasts with the capital market for longer-term funding, which is supplied by bonds and equity
posted @ 11:35 AM,
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Procedures and Document Used to Establish Letter of Credit
Monday, September 21, 2009
- After the exporter and customer agree on the terms of a sale, the customer arranges for its bank to open a letter of credit.
- The buyer's bank prepares an irrevocable letter of credit, including all instructions to the seller concerning the shipment.
- The buyer's bank sends the irrevocable letter of credit to a local bank, requesting confirmation. The exporter may request that a particular bank be the confirming bank, or the foreign bank selects one of its local correspondent banks.
- The local bank prepares a letter of confirmation to forward to the exporter along with the irrevocable letter of credit.
- The exporter reviews carefully all conditions in the letter of credit. The exporter's freight forwarder should be contacted to make sure that the shipping date can be met. If the exporter cannot comply with one or more of the conditions, the customer should be alerted at once.
- The exporter arranges with the freight forwarder to deliver the goods to the appropriate port or airport.
- When the goods are loaded, the forwarder completes the necessary documents.
- The exporter (or the forwarder) presents to the local bank documents indicating full compliance.
- The bank reviews the documents. If they are in order, the documents are airmailed to the buyer's bank for review and transmitted to the buyer.
- The buyer (or agent) gets the documents that may be needed to claim the goods.
- A draft, which may accompany the letter of credit, is paid by the exporter's bank at the time specified or may be discounted at an earlier date.
Documents
The following documents are commonly used in exporting through LC .
- Commercial invoice. As in a domestic transaction, the commercial invoice is a bill for the goods .
- Bill of lading. Bills of lading are contracts between the owner of the goods and the carrier .
- Certificate of origin. Certain nations require a signed statement as to the origin of the export item.
- Inspection certification. Some purchasers and countries may require a certificate of inspection attesting to the specifications of the goods shipped, usually performed by a third party.
- Dock receipt and warehouse receipt. These receipts are used to transfer accountability when the export item is moved by the domestic carrier to the port of embarkation and left with the international carrier for export.
- Insurance certificate. If the seller provides insurance, the insurance certificate states the type and amount of coverage.
- Export packing list. Considerably more detailed and informative than a standard domestic packing list,.
Labels: finance, Letter of Credit
posted @ 12:34 AM,
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Swiss Bank Secrets
Wednesday, August 26, 2009
Under the agreement, UBS -- Switzerland's largest bank -- is expected to turn over the names of Americans who controlled 4,450 accounts that are currently open or have been closed.
The secret accounts at one point held as much as $18 billion, the IRS said.
"We will be receiving an unprecedented amount of information," IRS Commissioner Doug Shulman told reporters Wednesday morning.
The settlement follows a long-running effort by the U.S. government to penetrate Swiss bank secrecy and catch tax evaders.
The U.S. government had been seeking a federal court order demanding that UBS identify the holders of 52,000 accounts. The Swiss government vowed to prevent such a disclosure, leading to weeks of negotiations.
Switzerland was fighting to preserve the reputation for privacy that has made its banking industry a global powerhouse and a pillar of the Swiss economy.
The deal includes concessions that might make it easier for Switzerland to argue that its tradition of secrecy survived the battle.
The United States agreed to narrow its request.
More importantly, the United States agreed to drop its federal lawsuit against UBS and pursue the information through a Swiss legal channel under a tax treaty between the two countries.
The U.S. government tried to use that channel last year but got nowhere. Switzerland has agreed to handle the request differently this time.
Switzerland has not explicitly promised to identify the holders of the 4,450 accounts, but the two sides said that is the expected result, suggesting that the new U.S. request is mainly a formality and the outcome is preordained.
Under Swiss law, the affected depositors would have the opportunity to contest the release of their names and account information. But that, too, could be a hollow exercise. Under an interpretation of U.S. law, they might be required to disclose such appeals to the Justice Department, rendering moot any attempt to remain anonymous.
In February, to avoid criminal prosecution, UBS agreed to pay the U.S. government $780 million and admitted that it schemed to defraud the United States by helping Americans hide money from the IRS. At that time, the Swiss provided the names of 200 to 300 American depositors, which shows how much farther Switzerland is moving on the issue.
Some details of the settlement were not disclosed. The criteria the U.S. government used to narrow its request remain under wraps. That leaves UBS depositors guessing as to their personal risk of exposure and keeps them under pressure to seek leniency by turning themselves in to the IRS.
It could also obscure any shift in Switzerland's bank secrecy standards.
Labels: Banks, Economy and Business, finance
posted @ 2:04 PM,
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Difference between FATR and FIM
Wednesday, March 25, 2009
- Purpose:To establish LC(s) for the import or raw materials.
- Repayment: Import documents to be retired through own resources and/or post import facility.
- Security: Lien on shipping documents consigned to Bank.
- Purpose: To adjust / retire shipping documents under LC (S) and to cover the transit period
- Repayment: Principal is repayable on or before maturity while Markup is to be serviced upon adjustment of the loan or at the end of each calendar quarter whichever is earlier.
- Security: Trust Receipt
Finance Against Imported Merchandise
- Purpose: To adjust FATR on due date.
- Repayment: Principal is repayable on or before maturity while Markup is to serviced upon adjustment of the loan or at the end of each calendar quarter whichever is earlier.
- Security: Pledge of stock of imported merchandize lying at Mill Premises.
Labels: finance
posted @ 9:15 PM,
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Feasiblity Study and Business Plan
Saturday, January 10, 2009
Feasibility Studies:In order to make wise investments in a marketplace experiencing increasing levels of risk, companies are turning to feasibility studies to determine if they should offer new products, services or undertake a new business endeavor. The purpose of a feasibility study is to determine if a business opportunity is possible, practical and viable. When faced with a business opportunity, many optimistic people tend to focus on just the positive aspects. A feasibility study enables a realistic view at both the positive and negative aspects of the opportunity. A feasibility study is an important tool for making the right decisions. A wrong decision often leads to business failure. For example, only 50% of start-ups are still in business after 18 months and only 20% are in business after 5 years.
Feasibility studies are useful when starting a new business or identifying a new opportunity for an existing business. Ideally, the feasibility study process involves making rational decisions about a number of enduring characteristics of a project, including:
- Definition of the project;
- Current market segmentation;
- Projected growth in each market segment;
- Current market offerings;
- Customer profile(s);
- Estimation of customers/revenues;
- Determination of competitive differentiation and advantage(s);
- Vision/mission statement;
- Definition of proposed operations/management structure and management methods; and
Financing and projected cash flows.
Pre Feasibility Studies: In large (and usually joint venture or multinational) projects, a preliminary study undertaken to determine if it would be worthwhile to proceed to the feasibility study stage.
Business Plan is a document that summarizes the operational and financial objectives of a business and contains the detailed plans and budgets showing how the objectives are to be realized.
Because the business plan contains detailed financial projections, forecasts about your business's performance, and a marketing plan, it's an incredibly useful tool for business planning. For anyone starting a business, it's a vital first step.
The Feasibility Study vs. the Business Plan
Groups often confuse the role of two of the tools used by groups in the project development process; the feasibility study and the business plan. Various components are common to both the feasibility study and the business plan. Assuming positive feasibility study results, some but not all of the information developed in the feasibility study will be incorporated into the business plan. The business plan also contains aspects that were not included in the feasibility study. It would, therefore, be useful to clarify the differences between the two.
The feasibility study is conducted during the deliberation phase of the project development cycle prior to obtaining project financing. It is an analytical tool that includes several scenarios for the decision-makers of the group to utilize in determining if they should continue the project. If, after completion of the feasibility study, the group decides to not proceed, there is no need to undertake the process of creating a business plan.
If the group decides to proceed, they construct a business plan. The business plan is the design for project implementation and, as its name implies, presents the guideline for the project plan. Its purpose is to serve as a blueprint for the group's responses during project operations.
Usually, the business plan contains less emphasis on differing scenarios than the feasibility study. Typically, it elaborates the scenario shown by the feasibility study to be most promising. Since the concept has been shown to be viable in the feasibility study, the business plan is much more focused on what action steps will be taken during and after project implementation.
The business plan is created later in the development process than the feasibility study. By this time project details, which required assumptions for the feasibility study, have been decided. Standard business plans include details such as key management personnel, business location, the financial package, product flow, and possible customers.
Since the feasibility study presents an independent review of the project, persons from outside of the group normally complete it. In contrast, he group typically develops their business plan internally. The group may revise the plan with input from bankers and investors, as the financial situation of the project becomes clearer.
Another difference between the two, although not as important for project development considerations, is that while the feasibility study is only applicable for the developmental stage of a project, businesses continue to use, and revise their business plans after a project has been implemented.
To summarize, a business plan shows the group's intended response to the critical issues revealed in the feasibility study. As the feasibility study refines the group's initial ideas, the business plan uses information from the study to further prepare the project for operation.
Labels: finance
posted @ 10:24 AM,
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INVESTOR'S PROTECTION FUND
Wednesday, December 31, 2008
INVESTOR'S PROTECTION FUND Means a fund creadted by the stock exchange to protect the investors in case of default by a member.
KSE INVESTORS PROTECTION FUND REGULATIONS are as under
PREMABLE
WHEREAS the Management of Karachi Stock Exchange considers that the investors' confidence in the fair dealings at the Exchange is the key to rapid development of the market;
AND WHEREAS to ensure effective risk management in secondary market trading and to protect investors' interest in the case of a default by a member of the Exchange there is need to have necessary regulations;
NOW, THEREFORE, the Karachi Stock Exchange (Guarantee) Limited in exercise of the powers conferred by sub-section (1) of section 34 of the Securities & Exchange Ordinance, 1969 makes, with the prior approval of the Federal Government, the following regulations, namely:
1. SHORT TITLE AND COMMENCEMENT
i. These regulations rnay be called "The KSE Investors Protection Fund Regulations."
ii. These regulations shall take effect upon their publication in the official Gazette of Pakistan.
2. DEFINITIONS
In these regulations, unless the subject or context otherwise requires;
(a) “Authority” means the Corporate Law Authority;
(b) "Board" means the Board of Directors of the Exchange;
(c) "Exchange" means the Karachi Stock Exchange (Guarantee) Limited;
(d) "Fund" means the KSE Investors Protection Fund;
(e) "Investor" means a person, not being Member, his agent or representative, who has purchased or sold any of the securities listed at the Exchange;
(f) "Member" means a Member of the Exchange;
3. ESTABLISHMENT OF FUND
The fund shall be established by the Board with contributions as follows:
(a) There shall be an initial contribution of rupees twenty million by the Exchange out of the Clearing House Protection Fund;
(b) Twenty five per cent of the clearing house charges paid by the members of the Exchange would be allocated to the Fund every year until the total amount in the Fund is raised to rupees five hundred million.
Provided that on the direction of the Authority the Fund shall cease to exist upon the creation of a national fund for the protection of investors through appropriate legislation.
4. ELIGIBILITY OF CLAIMS
All claims of an investor arising out of transactions entered into as per Rules and Regulations of the Exchange and approved by the Arbitration and Advisory Committee of the Exchange would be eligible to be considered under these regulations.
5. PROCEDURE FOR SETTLEMENT OF CLAIMS
(a) In the event of default of a Member, in addition to any surplus after distribution of losses as per Members' Default and Procedure for Recovery of Losses Regulations of the Exchange, an amount up to rupees ten million shall be set aside out of the Fund to satisfy the claims of the investors against the defaulting Member.
(b) In case eligible claims of investors determined against the defaulting Member exceed the amount available for settlement such claims of investors shall be satisfied on a pro-rata basis.
6. MANAGEMENT OF THE FUND
The Management of the Fund shall vest in the Board who may regulate the same through a Committee to be constituted under these regulations to process the claims and their settlements. The Committee shall include two outside directors who shall not be members of the Exchange.
Labels: finance
posted @ 1:55 PM,
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Foreign Debt of Pakistan
Wednesday, December 17, 2008
Annual 2007/08
* Foreign Debt $45.00bn
* Per Cap Income $1085
* GDP Growth 5.8%
* Average CPI 12.00%
Monthly November
* Trade Balance $-1.196bln
* Exports $1.53bln
* Imports $2.72bln
Weekly December 11, 2008
* Reserves $9.095 bln
Labels: finance
posted @ 10:08 AM,
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