Introduction to Capital Market
Capital Market is the market in which long term financial instruments, such as bonds, equities, mutual funds and derivative instruments, are traded. Capital Market serves as an alternative for a company's capital resources and public investment. It also facilitates the infrastructures needed for the seling and buying process and other related activities.
Financial instruments traded in the Capital Market are long term securities (a period of more than 1 year). They consists of stocks, bonds, warrants, rights, mutual funds, and other derivative instruments (options, futures, etc.).
Financial instruments (products) traded in the Indonesian Capital Market:
Capital Market Law Number 8 Year 1995 defines Capital Market as “the activity of trading and offering securities to the public, the activity of a public company with respect to securities it has issued, and the activities of securities-related institutions and professions.”
Capital Market plays an important role in the economy of a country because it serves two functions all at once. First, Capital Market serves as an alternative for a company's capital resources. The capital gained from the public offering can be used for the company's business development, expansion, and so on. Second, Capital Market serves as an alternative for public investment. People could invest their money according to their preferred returns and risk characteristics of each instrument.