Chapter 1 · Introduction to Financial Markets
What a financial market is for
Markets exist to move money from people who have it to people who can use it, and to let the first group change their mind.
A financial market does two jobs. It moves savings from people who have money they do not need now to organisations that need money now. And it lets the first group change their mind later by selling to somebody else.
The second job is what makes the first possible. Almost nobody would fund a twenty-year hydropower project if their money were locked in for twenty years. Because a share can be sold to another investor tomorrow, the company gets twenty-year money from people who are only committing for as long as they choose.
Capital market and money market
| Money market | Capital market | |
|---|---|---|
| Time horizon | Under one year | Over one year |
| Instruments | Treasury bills, commercial paper, certificates of deposit | Shares, debentures, government bonds |
| Purpose | Managing short-term cash | Funding long-term investment |
| Who uses it | Banks, large companies, the government | Companies raising capital, long-term investors |
NEPSE is a capital market. Nepal's money market runs largely between banks and NRB rather than on an exchange, which is why a retail investor rarely touches it directly.
Primary and secondary
The primary market is where a security is created and sold for the first time. The money goes to the issuer. An IPO is a primary-market transaction.
The secondary market is everything after that: investors trading with each other. The company receives nothing. When you buy a share on NEPSE, the company whose name is on it is not part of the transaction.
Saved in this browser only — there is no account to create. Clearing your browser data clears your progress.