JSE and equities Origin of SA Markets Structure of an exchange - PDF document

N Cert: FMI NQF6 THE ACADEMY OF FINANCIAL MARKETS Equities, Money and Capital markets THOUGHT FOR THE DAY Hope and faith are often the keys to unlock that which does not seem possible JSE and equities � Origin of SA Markets � Structure of an exchange � Classification of markets � Debt vs. Equity: � Shareholders rights 1

JSE and equities � The JSE and exchanges: � Two boards: Main board, Alt-X � SAFEX; Yield-X; Bond Exchange � Types of equity securities listed JSE and equities � Trading on the JSE: � Order driven vs. quote driven � Dual Capacity trading � Bids, offers, bear/short sales � Listing on the JSE: � Purpose of the JSE � Why list? � Requirements of listing � Media information � See next slide 2

Introduction to financial markets � Company results: � Dividends; effect, LDR; cum-and-ex div Introduction to financial markets � Indices and benchmarks � Well known indices � Composition of index � Example: Share name Shares issued Price (Day 1) A 1000 R15 B 2000 R8 C 3500 R5 Share prices on day 2; A = R17, B = R7, C = R7. If the index was 20 000 on day 1, what was the index on day 2? Introduction to financial markets � Valuation of shares: � NAV � PV of cash flows � PE method (payout ratio) � Example 2 � Expected price (Gordon model / CAPM) 3

Introduction to financial markets � JSE and equity: � Value determination of equities: � CAPM – Return or (cost of equity) = Risk-free rate + (Equity Market risk x Share specific risk) = Risk free rate + (Market risk x share Beta) � Dividend growth model (Gordon’s) = (Next expected dividend) ÷ (Cost of equity – expected dividend growth) � Excel example Introduction to financial markets � Money Markets � What is the money market? � Wholesale vs. Retail � Example 4 � Discount vs. Interest rate instruments � Example 5 � Repo’s vs. BsB � Various interest rates and Media information � Pricing convention Introduction to financial markets � Capital (Bond market) � Bond market structure and participants � Example 6 � Fixed Interest Bond working and cash flows � Bond value determination and example 4

Introduction to financial markets � Capital (Bond market) � Influence of interest rates on value; premium and discount bonds � Example 7 � Securitisation 5