Question

Essay (minimum of 500 words)
avoid plagiarsim

Which segment of the capital market (primary market or secondary market? had perform well during this pandemic and which segment had perform poorly? Explain.

Answer 1

The COVID -19 pandemic has significantly affected the performance of Capital Market i.e., both Primary and Secondary in negative way. According to the report of World Bank, the impact of pandemic has exposed market of every nation i.e., of Developed and Developing. Therefore, the performance was effectively poor. The performance of Secondary market was affected by the cash & liquidity crunch due to highly volatile markets. Meanwhile, the similar issue was faced by the primary market as well as there were not many potential investors in any economy. While, the performance of Capital Market was also been affectively negatively due to the huge capital outflows in nations which led to the depreciation of the value of their respective currency which also resulted in the lack of foreign institutional investors.In various of the nations, the individual investors have rather withdrawn their investments from Secondary Market considering the immediate requirement of cash with them and the probabilities of crashing of market. Meanwhile, the companies have been quite restrictive to issue the public offering in the primary market concerning the same issue. Whilst, the primary market of debt securities i.e., bonds or debentures has also not experienced the any substantial new offering. The significant poor performance of the capital market was also the result of the poor performances of business and markets around the globe due to apparent extended lockdown which led to the no or less business transactions. Various nations have even took the imperative steps of banning the short-selling in the secondary market which impacted the liquidity among the traders. The benchmark indeces such as Dow Jones, FTSE 100, NASDAQ 100, S&P 500 & others have experienced the sharp drop of around 03- 07%. This dip might be quoted as the sharpest dip after the 2008 subprice crises. The similar effect were experienced in the Asian Markets as well such as Nikkei, NSE, BSE & others.

Thus, it cannot be stated that any of these markets i.e., Primary or Secondary market has performed good during the time of pandemic. However, in order to compare the performance in relative terms it can be stated that secondary market perfromed better than primary due to the existing offering in the market and available investors. While, the organizations were bit reluctant to issue the fresh securities in the primary market due to the apparent liquidity crunch and lack of potential investors.