Course work: development of the stock exchange, as a factor to attract foreign capital into the economy of the Republic of Tajikistan

Course work: development of the stock exchange, as a factor to attract foreign capital into the economy of the Republic of Tajikistan

 

The plan:

content

introduction

1. Theoretical basics of stock market

1.1 Nature, objectives, stock exchange

1.2 The mechanism of functioning of the stock exchange. The participants of the Stock Exchange

1.3 Peculiarities of the OTC trading systems

 

2. Analysis of the development and functioning of the stock market in the Republic of Tatarstan

2.1. Information about the authority responsible for the supervision and regulation of the securities market

2.2. Information on the Securities Market

2.3. Setting activities aimed at improving the regulation of the securities market.

 

3. Issues and Trends effective functioning of stock markets in the RT

3.1 Problems of the stock market in the Republic of Tajikistan

3.2 Methods of eliminating the problems of development of the stock market in the Republic of Tatarstan

conclusion

References

 

 

 

 

 

 

 

Introduction

The formation of market relations in Tajikistan has led not only to the transformation of pre-existing forms and methods of management, technology change of commodity and financial markets, the modernization of the economy. Rebirth got some economic activities that were not required under the administrative economy, especially the stock market. In the early 21th century in Tajikistan began the revival of the stock market. Until recently, this market grew at the fastest rate compared to other segments of the market economy.

Drastic economic reforms can not be considered completed until until establish effective financial market, allowing the economy to attract investment funds. Given the scale of the economic transformation that needs to be done in Tadzhidkistane during the structural adjustment required huge financial resources that are not able to provide any budgetary system nor the internal sources of funding available to the plants. In this regard, the role and importance of the stock market in economic development can hardly be overestimated.

The purpose of this paper is to establish the role of the stock market in the economy of the state. This requires detailed study of the theoretical knowledge of the stock markets and stock exchanges to consider in practice.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. The stock market as part of the market infrastructure  

 

1.1 The nature and occurrence of exchanges

Initially, there were commodity exchanges, which are drawn to the standard, interchangeable commodities. Then, with the development of commodity exchanges came stock pit and stock exchanges. XVI-XVII centuries. - The period of exchange. In the 1531-1538 years. there were major exchanges in Amsterdam, Antwerp. C 1607 launched the Amsterdam Stock Exchange, was selected mechanism speculation. In 1705, stock market appeared in Russia (St. Petersburg). Until the middle of the XX century. (200 years), the leading position occupied the London Stock Exchange, and then transferred to the superiority of the American Stock Exchange in New York. In the 80 years she won first place in the world by volume of securities transactions. Currently, there are about 150 exchanges in the world. Some of them (30) are included in the International Federation of Stock Exchanges (MFFB), whose headquarters is in Paris. The aim is to coordinate MFFB structure of securities markets and to ensure equal treatment for all shareholders. The annual meetings MFFB addresses issues such as legislation and regulation of securities trading, the impact of economic policy on the stock market, the development of technology exchange business, etc.

Exchange - a nonprofit organization that is a nonprofit organization exempt from paying income tax. To cover exchange trading participants are charged with a series of payments (tax on transaction made on the trading floor, payment companies for the inclusion of their securities in the bond list, annual contributions of members of the exchange, and the like). All of these contributions and are major income exchanges that go on the content of the exchange facilities and salaries of its employees.

As a commodity on the stock market are the securities, as the prices of those goods - exchange of these securities. Way to set a price on the stock exchange auction - her cry. There are electronic exchanges, but the advantage is for the classic exchanges.

 

Can be sold on the stock exchange, not all products, but only admitted to it. And how sales much more diverse and more regulated. Goods entering the stock market, be sure to place the listing, the inclusion of securities in the quotation list ("sheet") exchange, when such securities are called in scheduled. In order to be listed, securities companies must meet certain requirements set by the exchange. In particular, these requirements include the level of revenue, the value of working capital, the market price of the securities issue, the amount of securities offered by public subscription, etc. These requirements may be different on different exchanges. After granting an application for listing on the stock exchange a special commission to study it, and in the case of satisfying the requirements of mutual company signs a formal agreement to exchange listing.

1.2 Structure of the stock market

The role and importance of the stock market in the system of market relations are determined by the following factors:

• attraction of available funds in the form of investment for the development of production;

• ensuring the flow of capital from the decaying industries in rapidly progressing industry;

• raise funds to cover the deficit of the federal and local budgets;

• to assess the state of the economy on indicators of the stock market;

• the impact of the change in inflation.

Securities market, like any other market, is a complex organizational and legal system to a specific technology operations.

The main purpose of the securities market is to attract investment into the economy.

securities market

subject of trade: securities and derivatives

professional participants

control system

 

Fig. 1. The organization of the securities market

 

Fig. 2. Conditions to attract investment

Providing liquidity of securities, which is achieved by a large number of buyers and sellers, and small differences in the prices of sale and purchase.

Information should be accurate, correct and meaningful. Therefore, great attention is paid to the stock market disclosure by:

• issuers of the financial condition of the company, the upcoming release of the securities, the largest shareholder, etc.;

• professional stock market participants about their qualifications, terms of providing customers with various services, their financial obligations;

• organizers of trade on trade rules, the listing conditions, etc.;

• regulatory changes of the legal framework, the system of control over the financial market and compliance with work rules.

1.3 Primary and secondary market

The stock market is the most important segment of the financial market, which includes the stock market, the money market, loan market and currency.

Fig. 3. Securities life cycle

According to this cycle, we consider two fundamental components of the stock market, ie its primary and secondary segment.

Primary market - a market in which is hosted for the first time issued securities. Its main participants are securities issuers and investors. Issuers that require financial resources for investment in fixed working capital, determines the supply of securities in the stock market. Investors looking for attractive and safe for use of their capital, create demand for securities. It is the primary market to mobilize temporary surplus funds and investing them in the economy. But the primary market not only provides the extension of accumulation in the national economy. Consequently, it can be concluded that the primary market is the distribution of surplus funds in industries and the national economy. The criterion for this placement in a market economy is the revenue from securities. This means that the available funds are directed to the enterprises, industries and the economy, ensuring the maximization of income. The primary market is a means of creating effective in terms of market criteria structure of the national economy, support services, under the current proportional to the current level of earnings for individual companies and sectors.

All this means that the primary stock market is the actual control of the market economy. It largely determines the amount of savings and investment in the country, serves as a natural means of maintaining proportionality in the household that meets the criterion of maximization of profit, and thus determines the pace, scope and effectiveness of the national economy. Primary market involves placing new issues of securities issuers. In this case, as issuers may make corporations, the federal government, municipalities.

Offering of securities in the primary market in two forms:

• by direct appeal to investors;

• through intermediaries.

Regardless of the form of placement of securities - through a direct appeal to investors or through an intermediary - preparing a new release includes a number of stages.

Fig. 4. Stages of preparing a new issue of securities

Primary market necessarily implies the existence of a secondary market. Moreover, in my opinion, the existence of the primary market in the absence of a secondary market is practically impossible.

Secondary market - a market in which handle securities in the form of resale of previously issued in other forms. The main market participants are not issuers and investors and speculators that seek to profit in the form of foreign exchange gains. The content of their activity is reduced to a constant buying and selling securities. Buy cheap and sell expensive - the main motive of their activity.

Secondary market always has an element of speculation. As a result, the secondary market is a constant redistribution of wealth, which is always in one direction - from small to large property owners.

There are two types of organization of secondary markets: organized - exchange and unorganized - OTC. In turn, both are taking a variety of forms of organization.

Traditional form of secondary market stands Stock Exchange - organized, regularly functioning market securities and other financial instruments, one of the regulators of the financial markets where cash capital.

The role of the stock market in the economy is determined, above all, the degree of privatization of property, to be exact - shares of stock ownership in the gross national product. In addition, the role of the exchange depends on the level of the stock market in general.

Fig. 5 Basic functions Stock Exchange.

1.4 Regulation of the stock market

Regulation of the stock market - it's streamlining of it all its participants and transactions between them on the part of organizations authorized by society to these actions.

Regulation of the stock market covers all the participants: issuers, investors, professional stock brokers, market infrastructure organizations.

Regulation of market participants can be external and internal. Internal regulation - is the organization of the subordination of its own regulations: regulations, rules and other internal regulations defining the activities of the organization as a whole, its subsidiaries and its employees. External regulation - is the subordination of the regulations of the organization of the state, other organizations, international agreements.

Regulation of the stock market by bodies or organizations authorized to perform control functions. From this point of distinction:

• State regulation of the market, government agencies and competent to perform certain regulatory functions;

• regulation of the professional participants of the stock market, or self-regulation of the market;

• public regulation or control over public opinion, and in the final analysis, the reaction of the wider community as a whole to any action in the stock market is the root cause, which begin on certain regulatory actions by the state or market professionals.

The regulatory process in the stock market include:

• creation of a regulatory framework for the functioning of the market, ie development of laws, regulations, rules, guidelines and other provisions of regulations that put the operation of the market and all the recognized observe the principles;

• selection of professional market participants, modern stock market, as, perhaps, any other market, is impossible without professional intermediaries;

• monitoring compliance with the implementation of all market participants norms and rules of functioning of the market, this control is performed by the appropriate regulatory authorities;

• a system of penalties for deviation from norms and rules established in the market, such sanctions may include: verbal and written warnings, fines, criminal penalties, exclusion from the ranks of the market participants.

The state of the stock market acts as:

• issuer when issuing public securities;

• Investors in the management of a large portfolio of shares of industrial enterprises;

• a professional participant in the trading of shares in the privatization auctions;

• controller to write laws and regulations;

• arbiter in disputes between market participants in the judicial system.

Government regulation of the stock market - is the regulation of the public government bodies.

Fig. 6. The main functions of the stock exchange

Fig. 7. Forms of government market

Direct, or administrative, management stock market of the state shall be effected by:

• mandatory requirements for all participants of the stock market;

• Registration of participants and securities emitted by them;

• licensing of professional activity;

• ensuring transparency and equal knowledge of all market participants;

• Support for the rule of law in the market.

Indirect, or economic management, stock market by the state through at its disposal and the economic levers of capital:

• A system of taxation (tax rates, exemptions and exemptions from them);

• monetary policy (interest rates, minimum wage, etc.);

• State capital (state budget, extra-budgetary funds and other financial resources);

• state property and resources (state enterprises, natural resources and land).

There are two concepts of state regulation of the stock market:

The first concept - market regulation focuses primarily in government, only a small part of the authority to oversee, monitor, setting the rules passed by the state, so-called self-regulatory organizations. Example - France.

The second concept - the maximum possible amount of power transmitted to self-regulatory organizations, a significant place in the control of occupied not stringent regulations and the negotiation process, and individual consultation with market participants that the government would retain the main control position, the ability to intervene at any point in the process of self-regulation . Example - UK.

In actual practice, developed foreign markets, the degree of centralization and rigidity of regulation varies between these two extreme concepts. Thus, we can conclude that the structure of government agencies that regulate the market, depending on market model adopted in a given country (banking and non-bank), the degree of centralization of management in the country and regional autonomy (in countries with a federal structure of the authority of the state of the stock market territory is transferred, for example in the United States - States, in Germany - land, etc.). general trend from the 30's is to create independent agencies or commissions on securities, regulatory capital markets, which attract all countries growing share of financial assets.

Self-regulatory organizations - is non-profit, non-governmental organization created by professional participants of the stock market on a voluntary basis, in order to regulate certain aspects of the stock market on the basis of state guarantees of support, expressed in awarding them the status of state self-regulatory organization.

1.5 Decision-making and the choice of strategy

Making investment decisions, each governed by its individual strategy, and each has its own trading system, your approach.

The main methods used by investors to predict the movements of market prices, it is a fundamental and technical analysis, with some investors still rely on their own experience and intuition.

Fundamental analysis is based on a study of the internal and external factors of the economic condition of the company, using the accounting reports of the company for the prediction of changes in the value of its securities. Traditionally, fundamental analysis is divided into two large sections: the analysis of the issuer and the macroeconomic analysis of the general state of the economy.

Technical analysis is based on the belief that the market price of shares takes in everything, and in the behavior of prices laid inventory of all existing factors. The main source of information in the technical analysis - the history of the dynamics of stock prices, mainly in graphical form. Prices follow a particular market trends, and the task of the investor - to identify the trends of growth or decline (trends), and time to identify market turning points (change of trend).

In general, the market price of the shares may be affected by many factors (Fig. 8).

Basic unwritten rule of speculators - "buy rumor, sell the fact." In anticipation of the release of important information relating to the issuer (if it is expected, for example, that the information is likely to be positive), the price per share is usually growing. When this information is published, it is often a process of so-called "profit" when the majority of investors believe that growth stocks is over and it's time to sell the shares at a profit. If these attitudes are prevalent in the market, begins a fall of stocks due to oversupply. More often, this happens if the published information is worse than expected.

For trading on the Exchange can apply different strategies: to make several transactions every day, or 1-2 per month, or even less. No one can say for sure what the best way to be considered - it rather depends on the nature of man, his personal qualities of its holdings of free time and other factors.

Fig. 8. Factors affecting the market price of shares

1.6 Investment Tools

Exchanges are trading following instruments: stocks, bonds, and derivatives of them - futures and options.

The campaign - it issued security, the right of the owner (shareholder) to receive part of the profits of the company in the form of dividends, to participate in the management of the company, as well as a portion of the property remaining after its liquidation.

Issued shares of two types: common and preferred.

Ordinary shares entitle the holder to vote at the shareholders' meeting and the right to receive dividends.

Preferred shares have the properties stipulated in their emissions.

Bond - it issued security fixing the right of the holder to receive from the Issuer by the deadline of its par value and recorded in her percentage of that value.

Futures contract - an agreement the seller and the buyer of the delivery of certain goods in the agreed time in the future. Buyers benefit from higher prices, so they can get the goods at a price below the current one. Vendors benefit from falling prices because they sell at a price higher than the current one. For the execution of the contract the seller can simply buy goods at a new, lower price, and put it on a futures contract. However, in practice, futures contracts are rarely completed physical delivery of goods. Most of them are completed by performing a reverse transaction.

Option - it is a derivative instrument that gives the right to buy or sell a specific quantity of the underlying asset (futures) at a fixed price at any time during a specified period.

An important property of the securities is their liquidity. Liquidity - a measure of the quality of the security, the possibility of applying to cash quickly and without loss to the owner.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2. Analysis of the development and functioning of the stock market in the Republic of Tatarstan

2.1. Information about the authority responsible for the supervision and regulation of the securities market

Agency for development of the securities market and specialized registrar of the Ministry of Finance of the Republic of Tajikistan, as the authorized state body for regulation and supervision of the securities market shall function under the authority established by the Statute of the Agency, approved by Order of the Minister of Finance of the Republic of Tajikistan on 20 February 2007 № 21.

In accordance with the Statute of the Agency the main tasks of the Agency is to regulate relations develop in the securities market, the prioritization of formation and development of the securities market, protection of rights and interests of shareholders, investors and issuers, monitoring of the securities market in order to maintain the stability of the financial system, the development of legal and regulatory framework for the securities market.

2.2. Information on the Securities Market

Number of institutional investors and the size of their assets

Type of Institutional Investor	Number of institutional investors		The assets (U.S. $)
	at 01.01.08.	01.01.09г.	01.01.08г.	01.01.09г.
pension funds	1	1	20.000	20.000
insurance funds	15	16	13.415.000	17.500.875
фонды investment funds	-	-	-	-

Stock market capitalization

Capitalization (U.S. $ millions)		Capitalization / GDP (%)
01.01.08 г.	01.01.09 г.	01.01.08 г.	01.01.09 г.
3.6 млн.долл.США	430 млн.долл.США	0.1	8.4

 

The volume and the number of registered securities market regulator Securities Issues

Types of Securities	The number of issuers		Number of issues		Volume actually placed securities at the offering price $ million
	По  состоянию на 01.01.08 г.	По  состоянию на 01.01.09 г.	По  состоянию на 01.01.08 г.	По  состоянию на 01.01.09 г.	По  состоянию на 01.01.08 г.	По  состоянию на 01.01.09 г.
Акции	1.450	1.486	27	55	3.6 млн.долл. США	430 млн.долл. США
Облигации	-	-	-	-	-	-
Total	1.450	1.486	27	55	3.6 млн.долл. США	430 млн.долл. США