Capital Market: Meaning, Types, Functions, Examples

Capital markets allow securities transactions and provide other benefits to companies, financial institutions, investors and traders.

There are several methods you can use to get additional funding for the company. One of which is through securities or securities.

Why are they called securities? because of paper Banks can collect debt from you. You can prove that your debt has been paid. or in some cases You can also use securities as collateral (collateral).

For large companies or governments Borrowing directly from banks or partners may not be a viable option. in order to solve the problem These large corporations issue securities in large quantities so that the general public can purchase them. The place for the wider community to buy securities issued by a company is known as the capital market.

understand the capital market

The capital market is a meeting place for investors and issuers to trade securities. The issuer is the party that issues the securities. Issuers can consist of public or private companies.

There are different types of securities traded in this market depending on the content of the contract and the issuer. The two most famous are share and bond.

Shares are securities that prove that a person owns shares in a related company. stocks traded in stock marketA bond is a security that proves that the investor has a collectionable debtor from the issuer concerned.

The concept of real capital markets It is quite simple, that is, the issuer issues securities to receive additional funds. The securities are then purchased by public investors with excess capital. Thus, the issuer gets additional money for running the business and in return the investor has the potential to generate income. Dividends and Investment Profits (raising securities prices).

A Brief History of the Capital Market in Indonesia

The history of Indonesia’s capital markets can be traced back before Indonesia became independent. Some sources mention that Verenigde Oost-Indische Compagnie or VOC (Dutch Trading Company Monopoly on Spices in Indonesia) was the first company to conduct an initial public offering (IPO) in the world in 1602.

According to the official website of IDX, the history of the Indonesian capital market dates back to 1912, when the Dutch colonial government established the stock exchange in Batavia (Jakarta) after inactivity due to World War I and II. Probably owned by the Netherlands It was nationalized by the Indonesian government.

The result is since the year 1956-1977 The capital market in Indonesia was again in a state of failure. Before finally, on August 10, 1977, the Jakarta Stock Exchange (JSX) was reactivated by the new government order. 30 years later, in 2007, the Jakarta Stock Exchange (JSX) was merged with the Liquor Exchange. Baya (BES) and changed its name to the Indonesia Stock Exchange until now.

type of capital market

There are several types of equity markets operating in Indonesia. However, there are two of the most important types of markets that novice investors should be aware of: Primary market and secondary market.

here is the description

1. Main market

The primary market is where issuers trade securities for the first time before issuing securities publicly. In this process, issuers and IPO-supporting institutions usually set the price of related securities based on the number of interested investors coming in and the price at which they are. Enter it in the account creation process.

In the past, to buy shares issued on the main market (still IPO), investors had to create an account with the securities company that became the IPO. insurer The issuer issuing related shares. For example, issuer A issues shares using the services of Securities Company B. The investor must then first create an account for buying and selling shares in Company B.

But now investors have to create an account at e-IPO.co.id regardless of the securities companies used by investors Not only buy stocks directly, on this page you can also see Which companies want to IPO? and details of the business

2. Secondary market

The secondary market is a place where investors can sell stocks or other securities purchased on the primary market to other investors. This means that in this market Investors do not have direct contact with issuers. but will contact other investors

In the past, trading in the secondary market Investors have to enter IDX orders through the relevant securities companies offline. Investors can only trade securities using the trading application installed on their mobile phone.

capital market function

1. Economic functions

The capital market or capital market has an economic function because in this market the issuer can issue securities to raise capital and can be bought by investors who want to invest their money. Therefore, the wheel of the country’s economy can spin as it should.

2. Financial duties

Capital markets have a financial function because they can be an option for issuers to get capital and an option for investors to invest their money.

capital market benefits

The existence of the capital market in Indonesia has many benefits for the state, society and companies. Here are some of them:

1. For the nation

State capital markets can provide benefits in the form of:

• An increase in income in the form of dividend taxes
• Financing options through government bonds (SUNs) or various types of bonds.
• Become one of the affordable wheel spinners.
• Become one of the tools to increase employment opportunities.

2. For the company

• With the capital market, companies can find other sources of funding besides debt and owner’s capital.
• Means to increase the brand awareness of the company.

3. For the community

• Capital markets can help increase employment as IDX certainly requires labor and capital market capitalization. can improve the operations of the company
• Refers to off-bank investments and insurance.
• It means getting passive income through dividends and capital gains.

capital market example

The concept of capital markets is one of the most famous in the world. Not only in Indonesia The capital market has become the main market for financial instruments in many other countries. In fact, the size of the market in some countries is much larger than the business size of the Indonesian stock exchange.

The so-called international stock exchanges are the New York Stock Exchange (NYSE), London Stock Exchange (LSE), Shanghai Stock Exchange. Hong Kong Stock Exchange (HKEX) and many others due to the high benefits of this market for companies, countries and the economy in general.