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

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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

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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

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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)

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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

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Introduction to financial markets

Capital (Bond market)

Influence of interest rates on value; premium and discount bonds

Example 7

Securitisation