GLOBALCAPITALMARKETS AND ISTRUMENTS

PRESENTERS
KINENEKEJO KILEWO LOY ENOCK Juma Killian Elias Fabian 20090601023 20090601123 20090600981 20090600957

INTERNATIONALFINANCIAL MARKETS
Theinternationalfinancialmarketcametobe developedwiththedevelopmentofinternational tradecentersacrosstheglobe.Globalcapital marketsconcentratesonlendingandborrowing inforeigncurrenciestofinancetheforeigntrade transactions Globalfinancialmarketcomprisesof internationalmoneymarketandinternational capitalmarkets.Forthesakeofthispresentation, wearegoingtodiscusstheinternationalcapital markets
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InternationalFinancialMarkets
IMF, World Bank, ADB, Country Funds, Global Mutual Funds, Pension Funds, Commercial banks, Producers, Individuals etc.

Surplus Units

Deficit Units

INTERNATIONAL FINANCIAL MARKET

MONEY MARKET

CAPITAL MARKET
Instruments:GDR,ADR& EuroBonds
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InternationalCapitalMarket
Isthemarketatwhichtheresidentof differentcountriestradelongtermfinancial assets Itisnotasinglemarketbutagroupofclosely interconnectedmarketswhichexchangesof assetstakeplace. Globalfinancialmarketsoperatesoutsidethe domain,regulationsandlegislativeframework ofacountry
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InternationalCapitalMarket
Any Capital Market can develop into International Capital Market, provided:
Local Regulations permit it Potential users are attracted to it.

Some Popular International Capital Markets are:

London New York Tokyo Singapore Hong-kong
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Reasons for International Capital Market

Currency Requirement; Multinational corporations interacts in deference currency and currency regime Cost of Capital; different countries have different risk exposure, there fore deferent cost of capital requirements Very Large Issue: International Positioning / Recognition Restriction in Domestic Market
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International Capital Market PLAYERS (PARTICIPANTS)

Borrowers / Issuers Lenders / Investors Intermediaries
Lead and Co-Managers Underwriters Agents and Trustees Lawyers and Auditors Listing Agents and Stock Exchanges Depository Bank

International Capital Market INSTRUMENTS

INTERNATIONALCAPITALMARKET

INTERNATIONALBOND MARKET

INTERNATIONALEQUITY MARKET CROSSLISTING

EUROBOND

FOREIGNBOND DIRRECTLISTING INDIRRECTLISTING

GLOBAL DEPOSITORY RECEIPT

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International Capital Market EQUITY Direct cross listing

Firmscanissuedirectlytheirsecuritiesas ordinarysharesonforeignstockexchange, andthelistingcanbeprimaryorsecondary.Eg TanzanianfirmfloatingsharesinNairobiStock exchange

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International Capital Market EQUITY indirect cross listing

This also known as Global depository receipt (GDR) Adepositaryreceipt (DR)isatypeofnegotiable(transferable) financialsecuritythatistradedonalocalstockexchangebut representsasecurity,usuallyintheformofequity,thatisissued byaforeignpubliclylistedcompany.TheDR,whichisaphysical certificate,allowsinvestorstoholdsharesinequityofother countriesEg ADR, EDR etc. denominated in some freely convertible currency which is used as a funding vehicle for raising capital simultaneously in many markets (countries)

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Equity GDR & ADR PROCESS OF ISSUE

Issuing Company (RIL)
Dividend in Rs. Dividend in $ Payment in Rs. Issue of Depository Receipt Share Certificates

Domestic Custodian Bank (SBI)

Foreign Depository (Morgan Stanley)

Payment in $

GDR / ADR Holders (Bank of America)

Clearing Agency (Euro Clear / Cedel)

Flow of Shares Flow of Payment

Foreign Stock Exchange (NYSE, LSE)

Flow of Dividend
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International Capital Market Euro Bonds

Bond issued outside the country of the currency in which it is denominated

Bearer Bonds Interest Coupon attached Listed on one or more stock exchanges Generally traded in OTC Market Free from regulations of Govt. - where issue is made Terms are decided keeping whole world in mind
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International Capital Market Euro Bonds Types

Straight Debt Bonds / Fixed Rate Bond
With a fixed interest rate, repaid on maturity

Floating Rate Bond

Flexible Interest Rate, pegged to a benchmark like LIBOR

Convertible Bonds
Convertible in other instruments after a time

Cocktail Bonds
Bonds denominated in mixture of currencies like SDR, EURO
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International Capital Market Foreign Bonds

Bond issued in a foreign country denominated in currency of that particular country

Yankee Bonds US Market Samurai Bonds Japanese Market Bulldog Bonds UK Market etc.
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Euro Bonds PROCEDURE OF ISSUE

Stage I: Preparation for the Issue
Decision about size of issue Decision about Lead Manager( the investment bank which has primary responsibility of organizing bond issuance.) Decision about FEATURES/TERMS OF THE ISSUES
Price Time Maturity etc.

Preparation of PROSPECTUS and Other Legal Documents Approval from Authorities

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Euro Bonds PROCEDURE OF ISSUE

Stage II: International Credit Rating
Credit Rating is a rating by globally accepted Financial Agencies like AAA+ ( eg rating agency are Standard & poor, Moody etc) It helps investors in choosing their investment avenues Become important in international context, as company is not known to all investors Lead manager helps company to get a good credit rating

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Euro Bonds PROCEDURE OF ISSUE

Stage III: Selling of Bonds (IPO)
Lead Manger with other selling group sell bonds To Individuals To Institutions such as investment trust, banks and companies

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Euro Bonds PROCEDURE OF ISSUE

Stage IV: Listing on Exchange
Arrangement is made to enlist the bonds on stock exchange In case of Foreign Bond, Listing is on one stock exchange In case of Euro Bond, listing is on many stock exchanges simultaneously

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GLOBALCAPITALMARKETIN TANZANIA
Thereisnointernationalbondinstrument issuedinDSEbutequityinstrumentsare issuedbydirectcrosslisting.

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CROSSLISTINGRULES
ThecrosslistingruleinDSEisthat: IssuersmustbeincorporatedinTanzaniaas publiccompaniesorelsewherethe companieslawisinconformitywiththelawof Tanzaniaforcrosslistingcompanies CompliancewithlistingrequirementsofDSE ApplicationforcrosslistingmadetoCEOof CMSAandDSEbysponsoringlicenseddealing memberofDSE
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CROSSLISTINGRULES
Applicationforcrosslistingshouldinclude Informationmemorandum Letterofnoobjectionfromstockexchangeof primarylisting Aletterofnoobjectionsfromthecapital marketsregulatoryauthorityofthecountryof primarylisting Legalopinionbyanadvocatepracticingin Tanzania
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Crosslistedcompaniesin Tanzania

SOURCE:

DSE HAND BOOK-English.indd 15

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