Security Analysis

SECURITIES
Chapter 3
INVESTMENT
BANKING
INVESTMENT BANKING
A specialized area of finance
Helps corporations and
governments raise capital
Act as intermediary between
issuers and investors
Focuses on securities (stocks
and bonds)
 MAIN FUNCTIONS OF INVESTMENT BANKING

Capital Raising (Underwriting of Securities)

One of the primary functions of investment banks is to help corporations raise

funds by issuing securities. This process is known as underwriting.
Investment bank assist in:
Initial Public Offerings (IPO): When a private company offers shares to the public for the
first time.
Seasoned Equity Offerings: When an already public company issues additional shares.
Bond Issuance: When a company sells debt securities to investors.

Types of Underwriting
Firm Commitment: Bank buys all shares and assumes full risk
Best Efforts: Bank sells as many shares as possible; unsold shares returned
All-or-None: Deals proceeds only if all shares are sold
 MAIN FUNCTIONS OF INVESTMENT BANKING

Mergers and Acquisitions (M&A) Sales and Trading

Investment banks act as financial Facilitates buying and selling of

securities
advisors when corporations
Provides liquidity in the financial
engage in merger or acquisition
markets

They help companies:

Buy or merge with other Equity Research and Asset Management
companies
Determine the value of
Analyzes companies and investment
companies opportunities
Negotiate deals and structure Advises clients and manages investment
transactions portfolios
IMPORTANCE OF
INVESTMENT BANKS

•Support business growth

•Improve capital allocation
•Provide financial expertise
•Help manage financial risk
 CHALLENGES AND RISKS IN
INVESTMENT BANKING

Conflict of Interest: Advising clients while engaging in trading activities may

affect objectivity.
Regulatory Compliance: Strict regulatory requirements increase compliance
costs and operational complexity.
Market Volatility: Earning depend heavily on capital market conditions and
economic stability.
Reputational Risk: Scandals or failedf transactions may damage credibility and
client trust
Operational Risk: System failures or execution errors may cause financial losses.
 SECURITY ANALYSIS

SECURITIES
TRADING
 Securities trading What Are Securities?

Securities trading is the buying and selling What Are Securities?

of financial instruments (called securities) A security is a tradable financial asset.
such as stocks, bonds, and derivatives in Securities represent ownership, debt, or
financial markets. rights to ownership.
 WHAT ARE SECURITIES?

A. Equity Securities (Stocks) B. Debt Securities (Bonds)

Stocks represent ownership in a company. Bonds represent loans made to companies or
When you buy shares, you become a shareholder. governments.

Example: If you buy shares of Apple Inc., you own a When you buy a bond:
small You are lending money
portion of the company.
You receive interest payments
You get your money back at maturity
Stockholders may:
Receive dividends (profit payments)
Example: Government bonds issued by the U.S.
Vote in company decisions
Benefit from price increases Treasury.
 WHAT ARE SECURITIES?
C. Derivatives
Derivatives are contracts whose value depends on another asset.
Common derivatives:
Options
An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an asset at a
fixed price within a certain time.
Futures
A futures contract is an agreement to buy or sell an asset at a specific price on a future date.
Swaps
A swap is a contract where two parties exchange financial obligations.

They are often used for:

Risk management (hedging)
Speculation
 PURPOSE OF SECURITIES TRADING

Liquidity
Investors can easily convert securities into cash

Price Discovery
Market determines fair value through supply and demand

Capital allocation
Funds flow to efficient company

Risk Management
Through diversification and derivatives
HOW SECURITIES TRADING PSE TRADING CYCLE
WORK?

1. Investors places order through

broker.
2. Broker sends order to exchange
3. Electronic order matching system
matches buyers and sellers
[Link] executed at agreed price
5. Clearing and settlement
 TYPES OF TRADING
A. Day Trading
Buy and sell within the same day
High risk
Requires constant monitoring

B. Swing Trading
Hold positions for days or weeks
Based on short-term trends

C. Long-Term Investing
Hold for years
Focus on company fundamentals

D. Institutional Trading
Large organizations such as banks and hedge funds trade in high volumes.
 IMPORTANCE OF SECURITIES
TRADING IN THE ECONOMY
Securities trading:

Helps companies raise capital

Creates investment opportunities

Increases economic growth

Provides liquidity in financial markets

Encourages wealth creation

 SECURITY ANALYSIS

TRADING
PARTICIPANTS
TRADING PARTICIPANTS
Trading Participants are individuals and
institutions involved in buying, selling,
and facilitating transactions of securities
in financial markets.

Main Participants:
Retail Investors
Institutional Investors
Brokers
Dealers
Market Makers
 TRADING PARTICIPANTS
[Link] Investors [Link] Investors
Individual investors Large organizations that
Invest personal funds invest pooled funds
Buy and sell securities for Trade in large volumes
personal wealth growth Have strong influence on
Usually trade in smaller market prices
amounts
Types:
Common Goals: Banks
Long-term investment Insurance Companies
Dividend income Mutual Funds
Capital appreciation Pension Funds
 TRADING PARTICIPANTS

[Link] [Link]
Licensed individuals or Buy and sell securities
firms
for their own account
Act as intermediaries
between buyers and Earn profit from price
sellers differences (spread)
Execute trades on behalf Take on market risk
of investors
Earn commissions or fees
 TRADING PARTICIPANTS

[Link] Makers
Provide liquidity to the market
Continuously quote:
Buy price (bid)
Sell price (ask)
Ensure securities can be traded anytime
WHY TRADING PARTICIPANTS ARE
IMPORTANT

Ensure market liquidity

Improve price discovery
Increase investor
confidence
Support market
efficiency
 Security Analysis

LOCAL
EXCHANGES IN
THE PHILIPPINES
 LOCAL EXCHANGES IN THE
PHILIPPINES

Philippine Stock Philippine Dealing &

Exchange (PSE) Exchange Corp. (PDEx)
The Philippine Stock
PDEx is the exchange
Exchange (PSE) is the
where fixed-income
country’s main stock market
securities like bonds are
where shares of publicly
traded in the
listed companies are bought
Philippines.
and sold.
 WHAT HAPPENS IN THE PSE?

Companies sell shares of stock to the public to raise money.

Investors buy and sell shares through brokers.
Stock prices go up and down depending on supply and
demand.
Investors may earn through:
- Capital gain (price increase)
- Dividends (share in company profits)
 WHAT HAPPENS IN THE PDEx?

The government and corporations borrow money by

issuing bonds.
Investors lend money by buying those bonds.
Investors earn through fixed interest payments.
Bonds are traded among investors in the secondary
market.
 WHAT IS TRADED IN PSE AND
PDEx?

Common stocks Government bonds

Preferred stocks Treasury bills
Other equity- Corporate bonds
related securities Other fixed-income
securities
 MAIN FUNCTIONS:

Provides a regulated Provides an organized

marketplace for bonds.
marketplace for stocks.
Helps government and
Protects investors
companies borrow
through rules and
money.
transparency.
Ensures transparency
Helps companies raise
and proper pricing of
funds for expansion.
fixed-income securities.
 EXAMPLES OF COMPANIES
LISTED IN PSE

Ayala Corporation (AC)

SM Investments Corporation (SM)
Jollibee Foods Corporation (JFC)
BDO Unibank, Inc. (BDO)
Globe Telecom, Inc. (GLO)
PLDT Inc. (TEL)
International Container Terminal Services, Inc. (ICT)
Monde Nissin Corporation (MONDE)
AREIT, Inc. (AREIT)
 EXAMPLES OF COMPANIES
LISTED IN PDEx?

BDO Unibank, Inc. (ASEAN Sustainability Bonds)

Megawide Construction Corporation (Fixed Rate Notes)
Philippine National Bank (Sustainability-linked Bonds)
Ayala Land, Inc. (Fixed Rate Bonds)
San Miguel Corporation (Corporate Bonds)
Cebu Landmasters, Inc. (Fixed Rate Bonds)
.
 STRATEGIES FOR
EFFECTIVE NETWORKING
Be Authentic Follow-Up
Genuine interest Maintain and nurture
in others relationships

Active Listening Provide Value

Engage in meaningful Offer help and share
conversations knowledge
 FOREIGN EXCHANGE
Foreign exchange (also known as Forex or FX) is the process of changing one
currency into another.

Foreign exchange, or Forex, is the global marketplace for exchanging national

currencies against one another, functioning as the backbone of international
trade and investment. It operates as a decentralized, 24-hour electronic network
where the relative value of currency pairs—such as the USD and EUR—is
determined by the constant pull of supply and demand.

These rates are influenced by shifting economic indicators, interest rates, and
geopolitical stability, making it the most liquid financial market in the world.
Whether it's a tourist swapping cash for a vacation or a multinational corporation
hedging against price swings, the core goal remains the same: converting the
value of one nation's m
WHO USES THE
FOREX MARKET?
Travelers Speculators

To pay for goods and services in Traders who try to make a

a foreign country. profit by predicting whether a
currency's value will go up or
down.

Businesses
Businesses Central Banks

To pay for imports or receive To manage their country's

payment for exports money supply and stabilize the
[Link].
 IMPORTANCE OF FOREIGN EXCHANGE
(FX) IN SECURITY ANALYSIS

Foreign exchange is important in securities analysis because currency movements directly affect
the value, risk, and returns of investments, especially in today’s global market. Here’s why FX
matters:

Affects returns – Exchange rate changes can increase or decrease profits.

Adds risk – Even if the investment is doing well, you can still lose money if the currency value
goes down.
Impacts company profits – Exchange rates affect exporters and importers.
Important for global investing – When investing in other countries, you must consider the
currency because it affects how much your investment is worth when converted to your own
money.
EXCHANGE MARKETS

•Platforms where financial

securities are bought and
sold between investors.
 TYPES OF EXCHANGE
MARKETS

•Stock Exchanges •Foreign Exchange

Markets
•Bond Markets
•Derivatives Markets
 FUNCTIONS OF
EXCHANGE MARKETS

Provide liquidity
Ensure price discovery
Promote transparency
Reduce transaction costs
DETAILED ANALYSIS POINTS

When analyzing markets, consider:

Trading volume
Volatility
Market trends
Economic indicators
Investor sentiment
IMPORTANCE OF EXCHANGE MARKET

Facilitates international trade

Enables foreign investments
Helps manage currency
Supports global economic stability
TYPES OF
ORDERS
 TYPES OF ORDERS

1. Market Order
Buy or sell immediately at the current market price.
Fast execution.
Price may change quickly.
2. Limit Order
Buy or sell at a specific price you choose.
You control the price.
It may not be executed if the price is not reached.
3. Stop Order (Stop-Loss Order)
Used to limit losses.
Becomes a market order when a certain price is reached.
 TYPES OF ORDERS

4. Stop-Limit order
Combination of stop order and limit order .
When the price is reached, it becomes a limit order not
market order.
5. Day Order
Valid only for one trading day.
If not executed, it is automatically cancelled.

6. Good-Till-Cancelled (GTC) Order

Stays active until executed or manually cancelled.
Can last for weeeks or months (depending on broker rules).
THANK YOU
FOR YOUR ATTENTION