Capital market functions

INVESTMENT is a function of national savings, hence an engine of economic growth. Capital markets provide platforms for alternative sources of long-term finance for long-term productive investments. They serve as a gauge for corporate performance hence a mechanism for corporate control and a barometer for economic growth.

Capital markets release pressure on banking sectors by matching long-term investments with long-term capital. Most economies often tend to overlook the importance and role of capital markets towards reviving their industries and economies at large, with the ultimate problem of overburdening the banking sector. Below are some capital market functions: 1. Economic growth — capital markets help accelerate the process of economic growth and reflect the general condition of the economy. They facilitate proper allocation of resources from persons with surplus capital to those in need of capital. The market facilitates expansion of industry and trade of both public and private sectors leading to balanced economic growth in the country.

2. Capital formation — capital formation is net addition to existing stock of capital in the economy. Through mobilisation of ideal resources, capital markets generate savings, which are subsequently used to fund the productive sector.

3. Liquidity — The market provides liquidity for financial instruments that trade in a secondary market as market intermediaries easily link buyers and sellers at a centralised trading platform.

4. Savings — The market provides an avenue for mobilising idle savings for an economy. Capital markets provide a bridge by which savings are transmitted into long term investments.

5. Transparency and price discovery — Stock markets are available and visible to a wider investing public. Consequently, the price of securities is determined by market forces through interaction of all interested buyers and sellers.

Upcoming AGMs / EGMs

◆ National Foods Holdings Limited, Gloria House, Workington, Harare, November 19, 2018, 0845hours.

◆ Meikles Limited, Parklands, 26 Greenhithe Lane, Borrowdale, Harare, November 20, 2018, 0900hours.

◆ Simbisa Brands Limited, Northend Close, Borrowdale, November 23, 2018, 0815hours.