Financial Markets in Australia Essay

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Financial Markets in Australia
Financial market is a marketplace that creates products that offers a return to those who invest or save money for the uses of others who need additional funding. It is also a place for the participation of buyers and sellers in trading assets such as equities, bonds, currencies and derivatives. The four main financial markets that exist in economies are ‘the share or equity market’, ‘the debt market’, ‘the derivatives market’ and ‘the foreign exchange market’. Competitions of financial markets can be found in nearly everywhere in Australia and exist globally, for example; the competitions between the four bank of Australia.
Financial markets are split into two main types; primary and secondary financial markets. Primary financial markets sell securities to the economy which are form of financial instruments such as shares and bond that allows the holder to claim real assets. Secondary markets deals with the trading of financial assets that has already been sold on the primary market. Most financial markets transactions are in the secondary market however, a company who trades on the secondary markets does not receive money from these transactions.
Borrowers and lenders play a crucial role in the debt market and is very important to the economy; borrowers are individuals who borrowed funds in financial markets their own welfare such as businesses borrowing for investment, consumers borrowing for housing or consumption and governments borrowing to finance budget deficits or infrastructure projects such as water and energy. Lenders are those who supply funding with an intention of earning a return from it; they could be individuals who have leftover income, businesses that has unused profits and international lenders who is running a surplus. Usually these transactions are dealt with by financial intermediaries who charges borrowers interest to their loan and making accumulated funds. There are a range of financial intermediaries, mostly divided into banks and non-bank financial institutions such as mortgage originators and superannuation funds. Financial market products vary to suit the different needs of lenders and borrowers and vary in risk, return and liquidity. These products include consumer credit, housing loans, short – term debt securities, shares, financial futures and foreign exchange.
Share market belongs in the share or equity market. It is a place where investors buy and sell shares which is a type of financial asset that allow individuals to own part of a company. The share market is very important to firms since they can earn money necessary for growth and development through selling shares. It is also very beneficial for individuals as they could gain returns on their funding; this could significantly increase or decrease their wealth. Measures of overall value of companies listed on the Australia Securities Exchange also known as ASX are taken by the All Ordinaries Index. ASX is the primary stock exchange market in Australia, most trading are done electronically nowadays; one of the biggest stock traded in ASX is BHP Billiton.
Share market is also an indicator of economic conditions of a country; representing the level of confidence of individuals and firms in the economy. It provides companies an opportunity to fund themselves for investment and growth. When a business makes its entrance on the stock exchange it is called a float. Once a business has floated on the market, they pay regular dividends to shareholders who could be individuals; this is important to the operation of firms as they depend on these funds to invest or expand the business. Shareholders who decided to sell their shares can also make a profit if its charge is larger than their purchase; these profits are known as capital gain.
Australia’s financial markets are merging with the global financial markets. Participants from foreign countries are investing in Australian markets through increasing the