Go through the following links:

http://www.dbs.com/sg/corporate/treasury/Pages/default.aspx

http://www.dbs.com/sg/corporate/capital/Pages/default.aspx

CAPITAL MARKETS:

A capital market is a market for securities (debt or equity or mortgage), where business
enterprises (companies) and governments can raise long-term funds. It is defined as a
market in which money is provided for periods longer than a year, as the raising of short-
term funds takes place on other markets (e.g., the money market). The capital market
includes the stock market (equity securities) and the bond market (debt). Financial
regulators, such as the UK's Financial Services Authority (FSA) or the U.S. Securities
and Exchange Commission (SEC) and in India -SEBI, oversee the capital markets in their
designated jurisdictions to ensure that investors are protected against fraud, among other
duties.

CAPITAL MARKETS CLASSIFICATION

Capital markets may be classified as primary markets and secondary markets. In
primary markets, new stock or bond issues are sold to investors. In the secondary
markets, existing securities are sold and bought among investors or traders, usually on a
securities exchange, over the counter, or elsewhere.

ROLE OF CAPITAL MARKET

The primal role of the capital market is to channelize investments from investors who
have surplus funds to the ones who are running a deficit. The capital market offers
both long term and overnight funds. The financial instruments that have short or medium
term maturity periods are dealt in the money market whereas the financial
instruments that have long maturity periods are dealt in the capital market.

INSTRUMENTS TRADED ON CAPITAL MARKET

The different types of financial instruments that are traded in the capital markets are
equity instruments, credit market instruments, insurance instruments, foreign exchange
instruments, hybrid instruments and derivative instruments.

FACTORS EFFECTING EQUITY MARKET

Economic factors: GDP growth, personal income growth, industrial production, credit
growth, interest rates, inflation, currency movements etc.
Regulatory factors: Regulations on FDI, FII, SEBI regulations etc.
Sectoral factors: Competition, sectoral regulation etc.
Company level factors: Profit growth, corporate announcements such as a buyback,
dividend etc.

TERMS OF AND FACTORS EFFECTING BOND/FIXED INCOME MARKETS

Interest rates, yields , yield curve etc.
Equity offering-IPO: Initial Public offering
Process by which a private company transforms itself in a public company, the company
offers for the first time shares of its equity(ownership) to the investing public. These
shares subsequently trade on public stock exchange such as Sensex in India. Reason to go
public is to raise cash o fund growth and to increase the company’s ability to make
acquisitions using stock. Process of an IPO is
hiring the lead managers-Ibank, due diligence, drafting, filing draft with SEC/SEBI,
marketing once draft is approved by SEC/SEBI and final pricing.

FPO:
Follow on offering or secondary, a company that is already publicly traded sometimes
sell stock to the public again.

Bond offerings:
Reasons for offering bond instead of equity- stock price of issuer is down, or the firm
does not want to dilute its existing shareholder by issuing more equity, or the company is
very profitable and wants tax deduction by paying bond interest while issuing equity
offers no tax deduction.

Few terms the meaning of which you should know;

Market cap (no. of shares x price) , P/E (price to Earning Per Share ratio), derivative,
equity, bond, currency or foreign exchange, mutual Fund, hedge fund, yield (annual
return on investment, a high yield bond pays a high interest rate, yield is inversely
proportional to price of a bond) underwriting( performed by ibank when securities are
issued to investors, the bank takes the liability in hand and sells the securities to investors
at a higher price ,earning on the spread)

UNDERWRITING:

What Does Underwriting Mean?

1. The process by which investment bankers raise investment capital from investors on behalf of
corporations and governments that are issuing securities (both equity and debt).

2. The process of issuing insurance policies.

Investopedia explains Underwriting

The word "underwriter" is said to have come from the practice of having each risk-taker write his
or her name under the total amount of risk that he or she was willing to accept at a specified
premium. In a way, this is still true today, as new issues are usually brought to market by an
underwriting syndicate in which each firm takes the responsibility (and risk) of selling its specific
allotment.

SUBPRIME:

Read this link-http://en.wikipedia.org/wiki/Subprime_lending

A simple article explaining the sub-prime market, the current situation and its
effects on the BSE sensex.

The Bombay Stock Exchange Sensitive Index or Sensex as it is more popularly known
fell by 643 points today. Various stock market experts have blamed the subprime crisis in
the United States. So what is this subprime crisis? And why is it having such a decisive
impact on the Indian stock market? To know more read on.

Essentially it all starts with an American wanting a home loan. But there is a slight
problem. He doesn't have a great credit rating. So a bank will not give him a home loan.
Enter a second American who has a good credit rating and is willing to take on some
amount of risk. Given his good credit rating the bank is willing to give him a loan. The
bank gives the second American a loan at a certain rate of interest.

The second American divides this loan, into a lot of small tranches and gives it out as
home loans to lots of other Americans like the first American, who do not have a great
credit rating and to whom the bank will not give a home loan.

He gives out a loan at a rate of interest at a higher rate of interest than the rate he has
borrowed from the bank. This higher rate is referred to as the subprime rate and this
home loan market is referred to as the subprime home loan market. Also by giving out a
home loan to lots of individuals, he ensures, that even if a few of them default, his overall
position is not affected much.

The question that crops up here is, if this home loan market is subprime, what is prime?
The prime home loan market essentially refers to individuals who have good credit
ratings and to whom the banks lend directly.

Now back to the subprime market. The individual giving out loans in the subprime
market does not stop here. He does not wait for the principal and the interest on the
subprime home loans to be repaid, so that he can repay his loan to the bank, which has
given him the loan.

What does he do? He goes ahead and securitises these loans. Securitisation essentially
involves, converting these home loans into financial securities, which promise to pay a
certain rate of interest.

These financial securities are then sold to big institutional investors. And how are these
investors repaid? The interest and the principal that is repaid by the subprime borrowers
through equated monthly installments is passed onto these institutional investors.

The individual giving out the subprime loans, takes the money that he gets from selling
the financial securities and passes it on to the bank, he had taken the loan from, thereby
repaying the loan. And everybody lives happily ever after. Well not really.
The subprime home loans were given out as floating rate home loans. A floating rate
home loan as the name suggests is not fixed. As interest rates go up, the interest rate on
floating rate home loans also go up. As interest rates to be paid on floating rate home
loans go up, the EMIs that need to be paid to service these loans go up as well.

The higher EMIs hit the subprime borrowers hard. A lot of them, given their poor credit
rating, defaulted. Once, more and more subprime borrowers started defaulting, payments
to the institutional investors who had bought the financial securities stopped, leading to
huge losses.

Well, that still does not explain, why stock markets in India, fell?

Institutional investors who had invested in securitised paper from the subprime home
loan market, saw their investments turning into losses. Most big investors have a certain
fixed proportion of their total investments invested in various parts of the world.

Once investments in the US turned bad, more money had to be invested in the US, to
maintain that fixed proportion. In order to invest more money in the US, money had to
come in from somewhere.

And this money came in from emerging markets like India, where their investments have
been doing well. So these big institutional investors, to make good of their losses on the
subprime market, have been selling their investments in India and other emerging
markets. Since the amount of selling in the market, far overweighs the amount of buying,
the Sensex has been on a falling spree.

And that explains the title of this piece 'When Americans sneeze India catches cold'.

RECESSION
What Does Recession Mean?
A significant decline in activity across the economy, lasting longer than a few months. It is visible
in industrial production, employment, real income and wholesale-retail trade. The technical
indicator of a recession is two consecutive quarters of negative economic growth as measured by
a country's gross domestic product (GDP); although the National Bureau of Economic Research
(NBER) does not necessarily need to see this occur to call a recession.

Investopedia explains Recession

Recession is a normal (albeit unpleasant) part of the business cycle; however, one-time crisis
events can often trigger the onset of a recession.

A recession generally lasts from six to 18 months, and interest rates usually fall in during these
months to stimulate the economy by offering cheap rates at which to borrow money.

SECURITISATION
What Does Securitization Mean?
The process through which an issuer creates a financial instrument by combining other financial
assets and then marketing different tiers of the repackaged instruments to investors. The process
can encompass any type of financial asset and promotes liquidity in the marketplace.

Investopedia explains Securitization

Mortgage-backed securities are a perfect example of securitization. By combining mortgages into
one large pool, the issuer can divide the large pool into smaller pieces based on each individual
mortgage's inherent risk of default and then sell those smaller pieces to investors.

The process creates liquidity by enabling smaller investors to purchase shares in a larger asset
pool. Using the mortgage-backed security example, individual retail investors are able to
purchase portions of a mortgage as a type of bond. Without the securitization of mortgages, retail
investors may not be able to afford to buy into a large pool of mortgages.

STEPS TAKEN TO BRING ECONOMIES OUT OF RECESSION:

Most of the economies offered fiscal stimulus to revive economies, major tool was
cut in interest rates across geographies, these fiscal stimulus has helped the
automobile sector, real estate sector, banking sector etc. and the stock markets have
nearly regained their positions( US -70% and India -90%), after they hit lows in
October2008.

One article highlighting the amount which was spent on the bailouts:

As the financial turmoil continues to batter world economies, triggering the collapse of more
number of financial institutions, the bailout packages from different governments globally is
nearing the $3-trillion mark - about three times the size of Indian economy.

Continuing a spate of billion-dollar rescue plans, the UK administration last week came up with
a mammoth 500 billion pounds bailout package (about $876 billion) primarily to shore up the
fortunes of the nation’s banking sector.

Earlier, the US government had moved the historic $700 billion rescue plan, in response to the
deepening credit crisis which has seen the fall of Wall Street icons like Lehman Brothers,
Washington Mutual and the distressed sale of Merrill Lynch.

Till date, the Bush administration alone has announced bailout packages to the tune of over
$990 billion.

Further, joining the likes of US and UK, Russia has approved a host of measures estimated to
be worth $86 billion to salvage the country’s banks hit by the credit squeeze.

Recent media reports said the Lower House of Russian Parliament Duma has given the green
signal for the billion- dollar rescue plan.

It would entail making about $50 billion available to banks and firms which have to refinance
foreign debt, the remaining amount would be given as loans to banks.

Besides, a handful of European countries have also already announced packages worth a
similar amount in efforts to save their troubled financial entities.
There are expectations for more such instances of helping hands coming from the
governments in Europe as the crisis is said to be fast spreading in the region after a full-blown
blast in the US.

List of bailouts by US:

 2008 - The Bear Stearns Companies, Inc.

 2008 - Fannie Mae and Freddie Mac
 2008 - The Goldman Sachs Group, Inc. bailed out by Berkshire Hathaway
 2008 - Morgan Stanley bailed out by The Bank of Tokyo-Mitsubishi UFJ
 2008-2009 - American International Group, Inc. multiple times
 2008 - Emergency Economic Stabilization Act of 2008[16]
 2008 - 2008 United Kingdom bank rescue package
 2008 - Canadian Bank Bailout
 2008 - Citigroup Inc.
 2008 - General Motors Corporation and Chrysler LLC- though not technically a bailout,
a bridge loan was given to the auto manufacturers by the U.S. government, this is referred to
by most as a bailout
 2008 - Fortis Bank
 2009 - Bank of America to help it absorb losses that were much greater than expected
incurred by its buyout of Merrill Lynch
 2009 - CIT Group $3 billion by its bondholders to avoid a bankruptcy