Financial markets broadly refer to a market where capital demanders and capital suppliers allocate resources through various financial instruments, playing an extremely important stabilizing role in the capitalist economy. Financial markets can include stock markets, bond markets, foreign exchange markets, commodity markets, and derivatives markets, etc. The supply and demand sides of funds use spot and futures, on-site or over-the-counter markets, and different forms of products and derivatives to buy, sell, and raise funds, forming the overall environment of the entire financial market. In other words, financial markets promote the development of capitalist society, create liquidity for enterprises, and also create opportunities for investors and even speculators.
Stocks are a type of securities. Companies raise funds in the market by issuing stock assets. Through a large amount of long-term capital inflows, they can strengthen their own capital capacity and accelerate the development of economic scale. In the stock market, participants can freely hold, transfer, and cash out any stocks listed on the exchange at any time. The stock market has been developed for a long time and is one of the most common investment channels in the current financial market.
It is divided into the primary bond market and the secondary bond market. The primary market is where governments, enterprises and financial institutions sell bonds to investors or any buyers for the first time to raise funds, but bond holders can still freely transfer bonds in the secondary market to cash them out. The bond trading market is very important. For governments, in addition to assisting in raising funds for fiscal budgets, it is also an important way to transmit the central bank's monetary policy. The yields and yield curves of all bonds can also be used as a benchmark for the returns of other financial assets, an important indicator for assessing the value of financial assets and reflecting market risk conditions.
International economic activities involving various countries, including consumption, trade, investment, etc., have generated a considerable amount of monetary receipts and payments. Due to the differences in currencies and monetary policy systems in various countries, individuals, companies, banks and even governments all need to convert one currency into another, and the foreign exchange market naturally emerged, almost all over the world. International foreign exchange transactions can operate 24 hours a day without interruption. After the evolution of the times, spot, swap, forward and other contract forms have been developed for investors to trade.
Unlike other markets that are mainly based on cash settlement, the commodity market is characterized by physical delivery, which is mostly carried out in the form of futures, which is relatively cumbersome. The process of physical delivery is generally that the seller transports the goods to the designated warehouse within the period specified by the central exchange, and the warehouse issues a warehouse receipt after acceptance. After entering the delivery period, the seller submits the warehouse receipt, the buyer submits the full amount of payment, and goes to the central exchange to go through the delivery procedures. Due to the development of the market, commodity trading can also be done in cash, only the price difference is settled, allowing investors to buy, sell or hedge.
Gold is one of the more popular commodities, and is traditionally considered by investors to be a value-preserving asset. Gold plays a very important role, not only as a safe haven for funds during times of inflation or political and economic tensions, but also as the most recognizable asset reserve due to its limited supply. In the gold market, the main participants include gold mining companies, miners, enterprises, individuals, financial institutions, and central banks of various countries.
The international financial market is huge, and the stock market is one of the most important markets for raising funds, and it is also the most popular. Stocks are a kind of securities of capital ownership, and the holders are called shareholders. After becoming a shareholder, you can share the dividends distributed by the company or the rewards brought by the increase in stock prices, but at the same time you also have to bear the company's operating risks and market risks.
However, due to the daily fluctuations in stock markets around the world, in order to help investors quickly understand the ecology of the entire stock market or the performance of a certain sector, the financial market has bred a portfolio composed of specific stocks, and then calculated the index by tracking the changes in stock prices in the portfolio. In the international financial market, the stock market indices of various places that are more valued by investors include the US Dow Jones Industrial Average, the Standard & Poor's 500 Index, the Nasdaq Composite Index, the German Frankfurt Index, the Nikkei Average, the Hong Kong Hang Seng Index, and the Shanghai Stock Exchange Composite Stock Price Index. The stock market is closely linked to the lifeline of the economy. When a stock market index changes, it mostly indirectly affects other stock indices and even other financial markets.
Further reading: Introduction to the world's top ten stock indices (with index trading schedule)
All financial products traded on margin carry a high degree of risk to your capital. They are not suited to all investors and you can lose more than your initial deposit. Please ensure that you fully understand the risks involved, and seek independent advice if necessary.
