Financial instruments

Financial instrument
Group 7: Van Thi
Ngoc
Tran Thi
Ly
Hoang
Thi Ngoc Mai


Outline
I.
II.
III.
IV.

Financial Instruments
Debt Instruments
Share Instruments
Comparison Between Debt
Instruments and Share
Instruments


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1. Definition: Video
are borrowing instruments held by
lenders.

I. FINANCIAL
INSTRUMEN

TS

are monetary contracts
are assets that can be traded

2. Types of Financial
Instruments
 Share/Equity
 Debt
 Deposit



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II. DEBT
INSTRUMENT
S

1. Definition
- For the issuer: a security to raise funds
- For the holder: a fixed income asset (interest +
principal)

 A contractual agreement - pay at regular
interval until the maturity date

Types
The number of year
2. The maturity

of Debt
Instruments
Long – term debt
≥ 10 years
Intermediate – term debt
Short – term debt

1 ≤ x < 10 years
< 1 year


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3. Types of Debt
instruments

II. DEBT
INSTRUMEN
TS

 Bonds
 Mortgages
 Commercial papers
 Certificate of Deposits
 Bankers’ acceptances
 …………….


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II. DEBT
INSTRUMENT
S

4. Bonds in Vietnam
 Main types of bonds in Vietnam
- Based on issuers:
+ Government bonds
+ Local government/ municipal
bonds
+ Corporate bonds


II. Debt Instruments
4. Bonds in Vietnam
Bond investing

Types

Risk

Government bonds

low

Local government
bonds/ municipal
bonds
Corporate bonds

Liquidity
high

Interest
rate

Purpose

low

Financing the
national debt

medium medium

medium

Financing public
interest projects

high

high

Financing firm’s
funds

low

II. Debt Instruments
4. Bonds in Vietnam
Current Vietnam credit ratings, according to main rating agencies.

Website: World Government Bonds


II. Debt
Instruments
5. Vietnam Government
bonds
+ issued by the Ministry of
Finance
+ with a specified term
denomination and interest
rate.

REGULATIONS ON THE ISSUE OF GOVERNMENT
BONDS issued along with Decree of the
Government No. 72 CP on the 26th of July 1994)


II. Debt Instruments
5. Vietnam Government bonds
- are issued in the following forms:
+ Treasury credits: < 1 year.
+ Treasury bonds: ≥ 1 year
+ Project bonds: ≥ 1 year (specific projects in accordance
with the State's investment plan)

REGULATIONS ON THE ISSUE OF GOVERNMENT BONDS
issued along with Decree of the Government No. 72 CP on the 26th of July 1994


II. Debt Instruments
5. Vietnam Government bonds
- Are bought in VND
- Are repaid in VND
- The Buyer:
+ select the types of bond.
+ buy in unlimited quantities.
REGULATIONS ON THE ISSUE OF GOVERNMENT BONDS
issued along with Decree of the Government No. 72 CP on the 26th of July 1994


II. Debt Instruments
5. Vietnam Government bonds
- The Buyer:
+ Vietnamese inside/outside the country.
+ Foreigners working and living in Vietnam.
+ Vietnamese businesses in all economic sectors.
+ Associations and mass organizations.
+ Enterprises with foreign-invested capital (operating in accordance
with the Law on Foreign Investment in Vietnam and the Ordinance on
Banks if they get the approval of the Ministry of Finance.)
REGULATIONS ON THE ISSUE OF GOVERNMENT BONDS
issued along with Decree of the Government No. 72 CP on the 26th of July 1994


II. Debt Instruments

5. Vietnam Government bonds
- can be bought and sold at the stock market
- are transferrable and inheritable.
- can be used as collateral or mortgage.
- cannot be used as substitute for money in payment or as tax payments
to the State.

REGULATIONS ON THE ISSUE OF GOVERNMENT BONDS
issued along with Decree of the Government No. 72 CP on the 26th of July 1994


II. Debt Instruments
5. Vietnam
Government bonds

Yield Curve of Vietnam
Government Bonds
Website: Investing.com


II. Debt
Instruments
5. Vietnam
Government
bonds

Website: World Government Bonds


Defi nition

Dividend yield

Face value

Benefits & Risks

Market value

Dividend

Share
Instruments

Ways to reduce risks

Factors


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 A smallest unit of the capital of the
company
 ‘Shares’ mean ownership in
a particular company
 Shares represent:
 Owner’s rights to the company’s
profits
 Provide the authority to make
decisions concerning company’s

problems

DEFINITION


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DIVIDEND

 A dividend is a payment made by a
corporation to its shareholders, usually
as a distribution of profits
 Dividends are decided and managed by
the company’s board of directors
 Dividends can be issued as cash
payments, as shares of stock, or other
property
 Not all companies pay dividends to their
shareholders
 Dividends can be paid:
 Quarterly
 Semi - annually
 Annually


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 The dividend yield of a share is
the dividend per share, divided by
the price per share

 Dividend yield = Return on your
investment
 % Dividend yield = x100%
 Higher dividend yields aren’t always
attractive investment opportunities

DIVIDEND
YIELD


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FACE VALUE

 Original value of a stock/ share stated
on the share certificate
 Face value is fixed
 It’s not related to the share price in
the secondary/ stock market
 Equity capital = F.V x No. of shares
 Dividend amount is calculated as
percentage of face value & hence
face value is kept very low



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Current trading price of stock
 Market perception about future of Co.

 Includes value of Intangible Assets

MARKET
VALUE


Benefits
& Risks

Ease
of trading
Volatility
Flexibility
Credit risk
Capital growth
Sector specific
risk
Low
costs
Lack of knowledge
Liquidity

Unexpected events
Available
information


Ways to
reduce
risks

Diversify portfolio

Have a long-term
outlook

Research investments before
making them

Monitor investments regularly
and reallocate resources as
necessary


Factors that
infuence
share prices

Supply and Demand

Economic factors (interest rate, economic outlook,
deflation, inflation,..etc)

Company’s earnings