The capital market is the equity market where shares of companies can be traded with the most known and demanded instruments. But in this market not only shares are traded, many other important instrument of capital market also come with this platform. In this small post, I will explain each of them.
Some key instrument of capital market
Shares are a credit instrument of capital market that represents the aliquot (proportional) part of a company. In this type of instruments, you have a property relationship with the company, so by acquiring a single share we immediately become owners of a part of it.
The way in which profits are obtained with the actions are two:
- Dividends: Part of the utility of the company that is distributed among the shareholders.
- Capital Gains: The difference between the purchase price and the sale price of the share.
Obligations or bonds convertible into shares:
The stock companies can issue bonds that represent the individual participation of their holders (investors) in a collective credit that is the responsibility of the same issuing company.
The way in which these obligations are converted into shares is simple. Securities are issued offering in principle an interest (fixed income) and at the end of the term of the obligation, it automatically becomes an action. It will depend on the nominal value at which the action is to determine how many actions I will have at the moment.
Securities representative of the capital of Foreign Issuers:
These securities may be outstanding in the BMV through the SIC (International Quotation System) system even though their origin market is not recognized by the CNBV, but they must be registered in a stock exchange recognized by the CNBV.
Warrants are another key important instrument of capital market. It is an optional title very similar to an option to buy or sell, gives its holders the right to buy or sell but not the obligation to do so and this is done within a certain period of time, at an agreed price and paying a premium first.
Real Estate Investment Trusts, by their acronyms (FIBRAS), are titles that grant the holder the right to a fixed income through the income that each title grants, or, of variable income through capital gain to the buy and sell said title.
The FIBRAS represents the financing of real estate in the market, and offer the minority investor the possibility of venturing into the real estate market with less investment capital. These securities are listed on the Stock Exchange.
CKDES is another important instrument of capital market. The Development Capital Certificates (CKDES) are financial instruments dedicated to growing sectors of the same economy. For example, Infrastructure, mining, communications, roads, ports, private equity funds, private capital for companies.
The difference between these securities and those of pure capital is stocks have a specific expiration term, but their performance is uncertain and long-term.
The Exchange Trade Funds (ETF’S) are securities that represent sectors, countries or stock indices. Its operation is simple. A title of ETF replicates the operation of our IPC, having this same the diversification of the 35 most important companies in the country in a single title. This means that a single action contains several shares in the interior, thus making it easier to participate in the stock market with passive management.