Loading…
HKSI PrepStudyingPaper 1
Switch exam
Ms Chan buys bonds newly issued by Harbour Logistics Ltd to fund a warehouse. How is this flow of funds best described?
In direct finance, the deficit unit (the company) obtains funds by selling its own securities to the surplus unit (the investor). Ms Chan's money reaches Harbour Logistics in exchange for the company's own bonds, and because the bonds are newly issued, the company receives the proceeds: this is the primary market. In indirect finance a bank or other intermediary takes savers' funds and lends them on, holding its own claim on the borrower. A secondary market trade transfers existing securities between investors and raises no new money for the issuer. Source: Standard financial system theory (direct and indirect finance; primary and secondary markets) (as at October 2026).
Treating any deal arranged by a bank as indirect finance. If the investor ends up holding the issuer's own security, it is direct finance.
Practise more Paper 7 The global financial system questions
Exam-style questions with worked answers, then full timed mocks. Free to start.
Build a daily practice habit — a few exam-style questions a day, with worked answers. Free to start.
Start practising →Original study material mapped to the public HKSI Paper 7 syllabus. Unofficial, not endorsed by HKSI Institute or the SFC. Verify figures and rules against current guidance before relying on them.