What economic advantages are created the existence of:
(i) Primary markets.
(ii) Secondary markets
(iii) Portfolio management firms.
ANSWER
i) Economic advantages are created the existence of Primary Market
• Raising Capital Business
• mobilizing savings
• Government can raise capital (sell bonus)
• Open market operators (control excess liquidity)
• Vehicle for Foreign Direct Investment
ii) Economic advantages are created the existence of Secondary Market
– Investment improvement for companies and small investors.
– Barometer for Healthy of economy and companies ( as whole)
– Privatization of parastatals and giving local citizens a chance for ownership of multi-national companies.
– Realize investments (disposal in small quantities due to separation of ownership and control.
– Improves corporate governance
– Diversification of investments hence reduction of risk
– Liquidity of securities improved.
iii) Economic advantages are created the existence of Portfolio management firms.
• Diversification
• Professional advice
• Watchdog for share under/over valuation
• Enhances market efficiency through information.