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Chapter 35 Securities Market: "Gold Panning" in Opportunities and Risks (1)
The primary market - the story behind the "scene"

Due to the continuous decline in the market, the confidence of the bulls has been severely hit. Experts believe that the securities market in early 2009 will gradually stabilize and rebound slightly. The low interest rate environment will still be maintained.

In early February, the primary market opened in 2, and the market is expected to rebound.The first is 2009-year financial bonds, followed by 2-year treasury bonds.Due to the abundant funds in the current market, it is estimated that interest rates may be lower than those in the secondary market, which will undoubtedly boost the secondary market.Because, although large banks have also bought a lot in the secondary market recently, they will not actively lower the yield by pointing to both sides, which is not as great as the negative impact of stock funds selling on both sides.Due to the abundance of bank funds and relatively high investment pressure, the bidding strength in the primary market may be more obvious, and if the primary market can reflect the bank's recognition of the rate of return, the positive impact on the bond market will be more obvious.

This analysis of the securities market in February 2009 mentioned the primary market and the secondary market many times, making people confused.What is the primary market and what is the secondary market?What is the connection between them?
Typically, the primary market is not well known to the public because the process of selling securities to the original purchaser is not open to the public.The primary market is a financial market in which companies or government agencies that raise funds sell their newly issued securities such as stocks and bonds to initial buyers.

Investment banks are important financial institutions that assist in the initial sale of securities in the primary market.Investment banks do this by underwriting securities, which means they ensure that a company's securities will sell at a certain price before marketing them to the public.

In western countries, the primary market is also called the securities issuance market, the primary financial market or the original financial market.In the primary market, demanders can obtain funds by issuing stocks and bonds.In this market, investors can subscribe for shares issued by the company.Through the primary market, the issuer has raised the funds needed by the company, and the investors have purchased the company's stock and become the company's shareholders, realizing the process of transforming savings into capital.

During the issuance process, the issuer generally does not directly conduct transactions with the holders of currency purchasers, and requires an intermediary agency, that is, a securities broker.So the primary market is also the brokerage market.

The primary market has the following main characteristics:

1. The issuance market is an abstract market, and its trading activities are not limited to a fixed place.

2. Issuance is a one-time act, and its price is determined by the issuing company and approved by relevant departments.Investors buy shares at the same price.

The secondary market refers to the place where securities are traded.The secondary market is a circulation market for securities and a place where issued securities are traded.The secondary market is to provide liquidity for marketable securities.Maintaining the liquidity of securities means that securities holders can sell the securities in their hands at any time to realize them (for example, if the securities holders cannot realize the securities in their hands at any time, no one will buy the securities).It is precisely because it provides a way for the realization of securities that the secondary market can also price securities to indicate the market price of securities to securities holders.

Once the issued shares are listed, they enter the secondary market.Investors buy and sell stocks according to their own judgment and needs, and the transaction price is determined by both buyers and sellers. Investors buy stocks at different prices on the same day.The secondary market is closely related to the primary market (primary market), which are both interdependent and mutually restrictive.The securities provided by the primary market and the type, quantity and method of issuance determine the scale, structure and speed of the securities in circulation in the secondary market, and the secondary market, as a place for securities trading, plays an active role in promoting the primary market.The well-organized, well-managed, and well-served secondary market quickly and effectively distributes and transfers the securities issued in the primary market, making them circulate to other investors who need more and are more appropriate, and providing realities for the realization of securities possible.In addition, the supply and demand of securities in the secondary market and the price level will strongly affect the issuance of securities in the primary market.Therefore, without the secondary market, it is impossible for securities issuance to proceed smoothly, the primary market is also unsustainable, and it is even more impossible to expand the issuance.

The secondary market - "extraordinarily lively" inside and outside the venue

The secondary market has two different organizational forms: exchanges and over-the-counter markets.Those with stocks, corporate bonds, etc. as trading objects are called stock exchanges; those with bulk commodities (such as cotton, wheat, etc.) as trading objects are called commodity exchanges.

The Shanghai Stock Exchange was established on November 1990, 11 and opened on December 26 of the same year. It is a not-for-profit legal person and is directly managed by the China Securities Regulatory Commission.Adhering to the eight-character policy of "legal system, supervision, self-discipline, and standardization", the Shanghai Stock Exchange is committed to creating a transparent, open, safe, and efficient market environment, and effectively protecting the rights and interests of investors. Its main functions include: providing venues and facilities for securities trading ; formulate business rules for stock exchanges; accept listing applications, arrange securities listing; organize and supervise securities transactions; supervise members and listed companies; manage and publish market information.SSE consists of Office, Personnel (Organization) Department, Party Discipline Inspection Office, Transaction Management Department, Listed Company Department, Market Supervision Department, Bond Fund Department, Membership Department, Legal Department, Technology Center, Information Center, International Development Department, and Research Center , Finance Department, Audit Department, Administrative Service Center and other 12 departments, as well as a temporary agency - the new generation information system project team, as well as two subsidiaries Shanghai Securities Communication Co., Ltd. and Shanghai Stock Exchange Information Network Co., Ltd., through their Reasonable division of labor and coordinated operation effectively play the role of the securities market organizer.

The SSE market transactions adopt the electronic auction trading method. All transactions of listed securities must be publicly declared and bid through the computer host, and the host will automatically match the transaction according to the principle of price priority and time priority.At present, the daily processing capacity of the trading host is 2900 million commissions, 6000 million transactions, and 16000 transactions per second.After years of continuous development, the Shanghai stock market has become the leading market in mainland China, ranking first in various indicators such as the number of listed companies, the number of listed stocks, the total market value, the market value in circulation, the total amount of securities transactions, the transaction value of stocks, and the transaction value of treasury bonds. bit.By the end of December 2004, the SSE had more than 12 million investors, 3700 listed companies, and 837 types of listed securities.The total market value of listed stocks is 996 billion yuan; in 26014.34, listed companies raised a total of 2004 billion yuan; a large number of pillar enterprises of the national economy, key enterprises, basic industry enterprises and high-tech enterprises have not only raised development funds but also converted operating mechanism.

After entering the new century, the Shanghai Stock Exchange shoulders the arduous task of standardizing and developing the market, and is also facing good opportunities to further promote various market constructions.Relying on the first-class hardware facilities, Pudong's superior location advantage and strong radiation, relying on the sound development momentum of Shanghai's economy and its unique leading effect, relying on the active promotion of the reform of state-owned enterprises and the construction of a financial center for Shanghai's capital market, the SSE will follow firm confidence, The idea of ​​strengthening supervision, maintaining stability, and standardizing development is multi-pronged in terms of technology, supervision, talents, and services, and opens a new chapter for building a world-class exchange that is standardized, transparent, efficient, open, and full of vitality.

The over-the-counter market is actually a computer and telecommunication system that connects securities firms and other customers around the world, also known as the over-the-counter market, which is a network for securities transactions outside the exchange.Such as NASDAQ, the automatic quotation system for securities dealers in the United States.

There are scattered multi-level OTC markets (mainly over-the-counter transactions) in Western countries, and then gradually form an on-exchange market with centralized bidding on the basis of the off-exchange market. It can be said that the development of the off-exchange market is the basis for the formation of the on-exchange market .Although the on-exchange market has gradually become the core of the entire securities trading market after its formation, it has not replaced the function of the over-the-counter market. OTC markets of various levels and types still exist and play an important role.Even now, in terms of trading volume alone, the trading volume of the OTC market is still greater than that of the on-exchange market.The existence of over-the-counter markets at different levels has greatly expanded the capacity of the securities market and improved the ability of the securities market to adapt to changes in economic development.Companies of different types and sizes and securities with different credit ratings can find a market suitable for their own issuance and trading.Various over-the-counter markets serve specific enterprises and investment objects with their own distinctive trading methods, pricing mechanisms and risk diversification mechanisms.

Although most of the shares of large companies are traded on organized stock exchanges like the Exchange, more common stocks are traded over-the-counter. Bigger than the New York Stock Exchange.Other over-the-counter markets include those that trade negotiable certificates of deposit, federal funds, banker's acceptances, and foreign exchange, among other financial instruments.

Tips for "making money" in bonds
After Zhu Hao, a veteran stockholder, successfully withdrew from the stock market in April 2004, he set his sights on the bond market.As the CPI index announced at that time continued to run at a high level, the negative rumors of interest rate hikes always plagued the bond market at that time, causing the bond index to fall rapidly from 4 points in mid-March 2004 to April in just one month. The lowest point on the 3th was 98 points.At this time, the stock market was in the first round of decline, and some of the withdrawn funds turned into the bond market, and the bond market launched a strong oversold rebound.Zhu Hao took aim at the opportunity and quickly bought.A month later, he successfully cashed out the settlement around 4 yuan, with a one-month gain of nearly 30%.His idea of ​​choosing bonds is short-term bonds with higher annual interest rates. Under the guidance of this idea, his bond investment income was as high as 91.10% in just 92 months.

Seeing Zhu Hao flourishing in the bond market, are you wondering how did he earn his money?Are you confused about what a bond is?

In the 17th century, the British government, with the support of the Parliament, began to issue government bonds with national taxation as the guarantee of repayment of principal and interest. Because such bonds are surrounded by gold rims, they are also called "gilt-edged bonds".Of course, the reason why this kind of bond is called gilt-edged bond is also because the credit of this kind of bond is very high, and ordinary people basically don't have to worry about not getting back their principal and interest.Later, gilt-edged bonds generally referred to bonds issued by the central government, namely national debt.In the United States, bonds with the highest grade of "AAA" rated by authoritative credit rating agencies such as Moody's and Standard & Poor's are also called "gilt-edged bonds".

In 1997, affected by the Asian financial crisis and the oversupply of domestic products, domestic demand was insufficient and economic growth slowed down.The Chinese government issued a part of the construction bonds in due course, which strongly stimulated economic growth.When the country is facing an emergency such as war, it is also a very important means to raise war funds through the issuance of public bonds.For example, the United States issued a large number of war bonds during the Civil War, which directly promoted the prosperity of Wall Street in New York.

Bonds are creditor's rights and debt certificates that the national government, financial institutions, enterprises and other airports directly borrow from the society to raise funds, and appear to bond investors, and promise to pay interest and interest repayment regularly at a certain interest rate.How do bonds make money?If you have a sum of money, but it may not be used until several months later, you hope that the money will provide you with profits in the months before it is used, and you can immediately reciprocate the cash when you need it.In this case, the best place to put that money is to buy short-term bonds.Because individual investors and investment institutions buy bonds on the one hand expecting to obtain regular interest income within a certain period of time, on the other hand they hope to borrow this way to safely keep the principal.

Regular payment of interest and repayment of principal and interest at maturity are all attractive features of bonds, but they are not limited to this. They also have another attractive feature: bonds that do not mature in time, can be repaid when necessary. Can be easily exchanged for cash.

However, investment should also pay attention to inflation, and the principal will be returned in full when it matures in time, but the money may not be able to buy what can be bought when the bond was originally purchased.The loss of purchasing power due to inflation is not limited to the principal. Inflation also affects the interest rate income when buying bonds.

When investors invest in bonds, they must pay attention to the principles of bonds, just like we must pay attention to obeying the traffic rules when crossing the road, so as to ensure our safety.Every bond investor must have his own set of "Sunflower Books."

(End of this chapter)