CAPITAL MARKET

Capital market DefinitionRole Supportin g institution s Instrument Mechanis m Investation

Definition of capital market According to Law No. 8 of 1995 Article 1 (13), which is the capital market is Activity concerned with the public offering and trading of securities, public companies relating to securities issuance, as well as institutions and professions related to the effect.

Capital market when seen from the procedure of securities trading, can be classified into three (3) categories, as follows. 1.Prime market (primary market) Primary market is the market where securities are traded for the first time, before it listed on the Stock Exchange. Here, the effect for the first time offered to investors by the Underwriter through the Securities Broker (Broker-Dealer) acting as a securities dealer. Price is determined by the securities issuers (companies that issue securities) and Underwriter. 2.Secondary market (secondary market) The secondary market is the market where securities have been listed on the Stock Exchange traded. The secondary market is the sale of securities in the primary market after the sale ends. Prices of securities in the secondary market of these securities is determined by the exchange rate, the rise and fall of a securities exchange rate is determined by demand and supply of these securities.

3.Bursa Parallel Stock parallel is an alternative for companies that go public to trade in their effect, since not all securities issued by companies that go public can sell its shares on the stock exchange. This is due to the requirements for listing on the stock exchange are quite heavy and very tight. Since 1988 the so-called parallel exchange Bursa Parallel Indonesia (BPI) began operations and is managed by the Union of Money and Securities Trading (PPUE), while the organization consists of brokers and dealers. In 1995 Indonesia Stock Exchange Parallel (BPI) merger with Surabaya Stock Exchange (BES). 3.Bursa Parallel Stock parallel is an alternative for companies that go public to trade in their effect, since not all securities issued by companies that go public can sell its shares on the stock exchange. This is due to the requirements for listing on the stock exchange are quite heavy and very tight. Since 1988 the so-called parallel exchange Bursa Parallel Indonesia (BPI) began operations and is managed by the Union of Money and Securities Trading (PPUE), while the organization consists of brokers and dealers. In 1995 Indonesia Stock Exchange Parallel (BPI) merger with Surabaya Stock Exchange (BES).

Role of capital market As a means for companies to raise funds from the public (investors). As a means for people to invest in financial instruments such as stocks, bonds, mutual funds and others. As a means to allocate economic resources optimally. Encourage increased investment so as to increase the prosperity of the people of a country. Encourage the management of the company in a professional manner. Providing an alternative investment to the community with the potential benefits and risks of losses that can be calculated

Capital Market Supporting Institutions Custodia n Security Administr ation Bureau Trustee

1.Custodian is a party providing securities custody services and other assets related to securities and other services, including the receipt of dividends, interest, and other rights, completing securities transactions, and represents the account holders are our customers. Parties may carry on business as a custodian is the Central Securities Depository, securities companies and commercial banks. 2.Registrar is the party that is based on a contract with the issuer carrying out registration of securities and the distribution of rights related to securities. Parties may carry on business as a Securities Administration Agency is a company which have obtained an operating license from the Financial Services Authority.

3.Trustee is a party representing the interests of holders of debt securities. The business activities as Trustee can be done by commercial banks and other parties designated by government regulation. Trustees represent the interests of holders of debt securities either inside or outside the court. In addition to supporting institutions of capital markets which have been mentioned above, there is a Capital Market Supporting Professionals who participate also in activities in the capital market. According to Law No. 8 of 1995 Article 64 stated that the Capital Market Supporting Professional consists of: accountant, konsuktan law, assessors (appraiser), and notary.

The task of the Financial Services Authority (FSA) FSA regulation and supervision duties to financial services activities in the banking sector, financial services activities in the capital markets sector, financial services activities in the insurance sector, pension funds, financial institutions, and other financial institutions. FSA was formed with the objective of held regularly, fair, transparent, and accountable, able to realize a financial system that grows in a sustainable and stable, capable of protecting the interests of consumers and society.

Capital Market Instruments Stock Bond Other Securitie s

1. Shares (Stocks) Stock is one of the instruments or capital market products. Stocks there are two kinds, namely ordinary shares (common stock) and preferred shares (preferred stock). In general, investors owning potentially get two advantages, namely dividends and capital gains. Dividend is a part of company profits are distributed to shareholders. While capital gains are gains from the positive difference between the purchase price and the selling price of the shares.

2.Bonds (Bonds) Bonds is proof of a company's debt will be paid at maturity at nominal value. The revenue earned from the bonds of interest that will be paid by the company issuing the bond at maturity. 2.Other Securities In addition to stocks and bonds that have been described above, there are some effects that can also be used as a medium of debt such as options, warrants and rights

Mechanism of Capital Market Transactions Observe the chart following capital market transaction mechanism.

Prior to the sale of securities on the stock exchange, these securities must be sold in the primary market in advance by the company issuing the securities (issuer) at a price that has been determined and no bargaining. In the primary market, the sale of securities is done by the company issuing the securities to investors with the help of an Underwriter and Broker Dealer.

Procedure purchase securities in the primary market are as follows. Buyers contact the Broker Dealer appointed by Underwriter (underwriter) to fill out the order form, after the order form is filled by the buyer (investor), then returned to the Broker Dealer If the number of securities which booked more than the amount of securities offered, then there is a period of rationing and a refund. Delivery of securities made after there is a match between the number of securities booked investors with the many effects that can be met by the issuer.

Procedure purchase securities in the secondary market or Stock Exchange is as follows. The mechanism of securities trading at the Stock Exchange may only be made by the Exchange Member. Exchange members are Brokerdealer who has obtained a business license from the FSA and has the right to use the system and or the means of the Stock Exchange in accordance with Stock Exchange rules.

System trading of securities on the stock exchange conducted through two systems of systems and systems Continuous Col. Col. system is a trading system that is led by officers called leadership exchanges cabbage. The first registered securities trading (listing) on the stock exchange with the auction system, the bidding process conducted by the leadership of the auction. Constantly system is a system of securities trading conducted by members of the exchange directly without going through the leader of cabbage. This trading system is done every day the exchange. For investors not exchange members who wish to purchase / sell securities he should contact one of the members of the stock exchange to make the purchase / sale of the desired effect / owned by the investor.

Investment in Capital Market If an investor invests capital market, he usually faces a number of risks such as financial risk, market risk and psychological risk. Financial risk is the risk arising from the inability of the company issuing the securities (issuer) to meet its obligations. Market risk is the risk arising from the declining price of substantial effect as a result of economic conditions, such as inflation, government policy, the policy of the company (the issuer) and others. While the psychological risk is the risk arising from the investor's own mistakes in decision making, influenced by fluctuations in the price of securities. The price of securities affected by the operation of the market mechanism (demand and supply).

To assess the feasibility of an investment in the form of securities, there should be a study or analysis of the effect. There are a number of analytical techniques in the assessment of these investments are the following. 1. Fundamental analysis Fundamental analysis can be used to estimate the value of the shares in the future whether to go up or down. Estimates rise or fall of stock prices is very important as a determinant to buy or sell stocks.

2.Technical analysis Technical analysis is based on the belief that the value of the shares will be always changing (volatile) in a relatively short time. With technical analysis can be estimated share price in the future to see fluctuations in the value of shares in the past. The method used in the analysis of which is the Dow Theory, Filter System, Price Volume System and Chart Pattern. 3.Economic analysis The economic analysis is based on the belief that the value of the shares in the future be influenced by macro economic conditions of a country. One indicator to see the state of the economy of the country is the value of Gross Domestic Product (GDP) of the country.

4.Financial Ratio Analysis Financial ratio analysis is widely used by investors to assess a securities issued by the company. This analysis is based on the company's financial statements. Financial ratios grouped into five types: liquidity ratios, solvency ratios, activity ratios, profitability ratios, and the ratio of the market.

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