🇵🇭 The Philippine Financial Market | The Foundation of Financial Literacy

Juan Finance, PhD, CMITAP, CTP, FIMS, CIS, CUSP

5 Jul 202002:16

Summary

TLDRIn this video, the Philippine financial market is explored, covering its four main components: the money market, capital market, forex market, and derivatives market. The money market involves short-term debt and investments, such as savings accounts, treasury bills, and commercial paper. The capital market deals with raising capital through government and corporate securities like bonds and stocks. The forex market facilitates currency trading, while the derivatives market provides hedging solutions through instruments like options and futures. The video provides a brief yet comprehensive introduction to these key financial sectors.

Takeaways

😀 The Philippine financial market is a network of financial intermediaries, users, and providers of funds.
😀 The market is divided into four categories: money market, capital market, forex market, and derivatives market.
😀 The money market involves short-term debt or investments with maturities of less than one year.
😀 Examples of money market instruments include savings accounts, demand deposits, time deposits, and Treasury bills.
😀 The capital market is where the government and private corporations raise capital through government securities and corporate bonds.
😀 Common and preferred stocks are also part of the capital market.
😀 The forex market is where currency trading occurs, such as converting US dollars to Philippine pesos.
😀 As of June 30, 2020, the exchange rate for 1 USD to PHP was 49.87, and 1 New Zealand dollar to PHP was 31.88.
😀 The derivatives market provides hedging solutions such as options, forwards, swaps, and futures contracts.
😀 Derivatives allow investors to buy securities (e.g., currencies) at specific prices and on specific days.

Q & A

What is a financial market?
-A financial market is a network of financial intermediaries, users, and providers of funds where transactions such as the buying and selling of financial instruments occur.
How is the Philippine financial market divided?
-The Philippine financial market is divided into four segments: the money market, capital market, forex market, and derivatives market.
What is the money market, and what types of instruments are involved?
-The money market involves short-term debt instruments or investments with maturities of less than one year. Examples include savings accounts, checking accounts, time deposits, Treasury bills, and commercial paper.
What is a key characteristic of the capital market?
-The capital market is focused on the raising of capital, either by the government or private corporations. It involves long-term investment instruments such as government securities, Treasury bonds, corporate bonds, and stocks.
Can you give an example of an instrument in the capital market?
-Examples of instruments in the capital market include government securities like Treasury bonds and Treasury notes, as well as corporate bonds, common stocks, and preferred stocks.
What is the forex market, and how does it work?
-The forex (foreign exchange) market is a platform for currency trading, where currencies are exchanged at current market rates. For instance, the value of one US dollar was 49.87 Philippine pesos as of June 30, 2020.
What role does the derivatives market play?
-The derivatives market provides hedging solutions to investors. It involves financial contracts such as options, forwards, swaps, and futures, which help manage the risk associated with price fluctuations in underlying assets.
What is an example of a derivative contract?
-An example of a derivative contract is a futures contract, where an investor can agree to buy or sell a specific security, such as a currency, at a predetermined price and date.
What is the difference between the money market and the capital market?
-The money market deals with short-term investments (less than one year), while the capital market focuses on long-term investments, including stocks and bonds.
How do derivatives help investors?
-Derivatives help investors hedge against risks by allowing them to secure future prices for assets, such as currencies, and protect against adverse market movements.