A capital market is a market which individuals and institutions trade financial securities. Institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. Thus, this type of market is composed of both the primary and secondary markets. There are two types of capital market which are Islamic capital market and conventional capital market.
In an Islamic capital market (ICM) market transactions are carried out in ways that do not conflict with the conscience of Muslims and the religion of Islam. Here, there is assertion of religious law so that the market is free from activities prohibited by Islam such as usury (riba), gambling (maisir) and ambiguity (gharar). The ICM is a component of the overall capital market in Malaysia. It plays an important role in generating economic growth for the country. The ICM functions as a parallel market to the conventional capital market, and plays a complementary role to the Islamic banking system in broadening and deepening the Islamic financial markets in Malaysia. Today, various capital market products are available for Muslims who only seek to invest and transact in the ICM. Such products include the SC list of Shariah-compliant securities, sukuk, Islamic unit trusts, Shariah indices, etc.
In a conventional capital market, its provide for the buying and selling of long term debt or equity backed securities. The capital markets channel the wealth of savers to those who can put it to long term productive use, such as companies or governments making long term investments. A key division within the capital markets is between the primary markets and secondary markets. In primary markets, new stock or bond issues are sold to investors, often via a mechanism known as underwriting. The main entities seeking to raise long term funds on the primary capital markets are governments (which may be municipal, local or national) and business enterprises (companies)....
Please join StudyMode to read the full document