The Global Capital Market

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11-2. Case: China Mobile. Biggest supplier of remote phone administration in the worldIn 2000 China was wrapping up arrangements to join the World Trade organizationDirect outcome: China will need to open up its telecom business sector to outside administration providersAs a preemptive procedure China mobileIncreased geographic coverageRaised capital throughIssuance of new sharesSelling 2% stake in co

Presentation Transcript

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11 Chapter The Global Capital Market

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Largest supplier of remote telephone utility on the planet In 2000 China was wrapping up transactions to join the World Trade association Direct result: China should open up its media transmission market to outside specialist organizations As a preemptive system China versatile Increased geographic scope Raised capital through Issuance of new shares Selling 2% stake in organization to Vodafone Selling ADRs Case: China Mobile

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Brings together: Those who need to contribute: Corporations, people, non bank money related foundations Those who need to acquire: Individuals, organizations, governments Market producers: Commercial and venture banks that interface speculators with borrowers Functions of a non specific capital market

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The principle players in a non specific capital market Fig 11.1

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Increases the supply of assets accessible Benefits both borrowers and financial specialists Borrower's point of view Lowers the cost of capital Investor's viewpoint Provides a more extensive scope of speculation openings Attractions of the worldwide capital market

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Market liquidity and the cost of capital Fig 11.2

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Risk decrease through portfolio expansion Fig 11.3

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Some normal recognitions Global capital market has expanded the relationship between's various securities exchanges diminishing the advantage of universal broadening truth be told, developments of stock costs crosswise over nations are not consummately corresponded Reflects two variables: Countries seek after various macroeconomic strategies and face diverse monetary conditions Different stock exchanges are sectioned by capital controls. Discernment that business sectors are coordinating, yet not as quickly as thought Home predisposition confuse International portfolio chance decrease

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Information innovation Diminishing expenses of sharing data Internet Computer influence Deregulation Response to: Eurocurrency showcase Increasing acknowledgment a 'free market' idea Dismantling of national capital controls Less confinements on internal/outward capital streams Growth of the worldwide capital market

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Global capital market dangers Nations more defenseless against theoretical capital streams in light of absence of learning Potential destabilization of economies (Mexico) Capital seeking after here and now increases Hot cash Long term understanding cash Lack of value data Investors respond to rapidly to news occasions Differing bookkeeping traditions Global capital market dangers

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Euro-money is any money kept money outside its nation of inception Eurodollars are dollars managed an account outside the United States Growth 1950s. Eastern Europeans, perplexed US would seize stores to repay claims for business misfortunes thus of Communist takeover of Eastern Europe Other occasions: Britain – 1957 U.S. – 1960s Failure of Bretton Woods Oil emergency – 1970s The Eurocurrency showcase

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Attractions Gave chance to the individuals who needed to store or get dollars (later, different monetary standards, also). Absence of government directions makes the Eurocurrency alluring Banks offer higher financing costs Drawbacks Unregulated framework could bring about loss of stores Borrowing reserves universally can open an organization to remote trade chance The Eurocurrency showcase

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Interest rate spreads in local and Eurocurrency markets Fig 11.4

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Attractions of the Eurobonds advertise Bonds have a tendency to be settled rate Foreign securities Sold outside the borrower's nation and in money of nation where issued Eurobonds Underwritten by a worldwide syndicate Issued by expansive enterprises, universal foundations and governments Placed in nation other than nation of cash and its inhabitants The worldwide security advertise

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Global value markets Where speculators can purchase/offer stocks Made up of many Stock trades far and wide

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Investors trying to expand their portfolios. Organizations looking to Issue stock in the nation Use stock and alternatives as a type of worker motivators Satisfy nearby proprietorship prerequisites Create financing for future acquisitions Increase the perceivability of the organization Who utilizes these business sectors?

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When a firm acquires from the worldwide capital market it must Weigh advantages of lower loan costs against dangers of an expansion in the genuine cost of capital because of unfriendly conversion scale developments Unpredictable developments in return rates, infuse hazard into remote cash getting, making something less costly more costly Borrower can fence by going into a forward contract Foreign trade chance and the cost of capital

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Growth of Global capital markets give chances to firms wishing to get or contribute cash. Firms can obtain reserves at lower costs Perhaps the rise of a brought together capital market in the EU? Chances to differentiate speculations FX hazard is a confounding variable Managerial ramifications