INTERNATIONAL

FINANCE
Harsha Kale (77)
Swapnil Loya (54)
Subject code – 404
 MEANING

• A global capital market benefits both borrowers and investors because it bring together those
from around the world who want to invest money and those who want to borrow money for
better than a single domestic market .
• For the borrower, the global capital market increases the funds available for borrowing and
lower the cost of capital. In domestic market, the pool of investors are limited to those who live
in particular country, so there is a upper limit on the supply of funds available .
• A global market increases the number of investors and supply of funds available from the large
pool .
• Also, the boarder pool obtained in a global market elements the limited liquidity found in a
domestic capital market and lowers the cost of capital .this mean that the dividend yield and
expected capital gains on equity investments, as well as interest rate on loans(debt), are lower .
• This lower price obtaining capital is vey important to companies all over the world. This is
particularly beneficial in less development countries, where the pool of investors tend to be smaller
than in more developed economics .
• The Euromarket is considered a major finance source for international trade, through the money
market or Eurocurency, Eurocredit, Eurobonds and Euro commercial paper.
STRUCTURE OF GLOBAL MARKET CAPITAL

Commerci Corporati
al bank ons

Central
Non-bank bank and
financial other
institution governme
s nt
agencies
PARTICIPANTS IN GLOBAL CAPITAL MARKET

ISSUERS

INVESTORS

INTERMEDIARIES
INSTRUMENTS OF GLOBAL CAPITAL MARKET

1. FOREIGN BONDS
It is a bond which is issued in domestic market by a foreign entity, in a domestic
market’s currency.
Regulated by domestic market authorities.

Benefits-
-Increases diversification of an investment portfolio
-Decrease the risk in currency exchange rate
-Hedge against a weak or falling US Dollar
2. EURO BONDS
It constitutes a major source of borrowing in the Eurocurrency market.
Eurobonds are bonds of international borrowers sold in different markets
simultaneously by a group of international banks.
Eurobonds are unsecured securities and hence normally issued by Government,
Governmental corporations and Local Bodies which are generally guaranteed by
governments of the countries concerned and big multinational borrowers of good
credit rating.
Euro bonds are denominated in number of currencies.
It also carries convertible clause.
3. External Commercial Borrowings
ECB refer to commercial loan (in form of bank loan, buyer’s credit, suppliers
credit, etc) availed from non resident lenders with minimum average maturity of 3
years.
Sources of ECB are-
Banks, Export Credit Agencies, Foreign collaborators, International Capital
Markets, Foreign Equity Holders.
Advantages:-
• Economic source for raising funds
• No need of credit ratings
• Provide foreign currency funds
4) Depository Receipts
It is a financial instrument whereby investors in one country can buy, hold or sell
the securities issued by companies in another country.
The depository receipt is a certificate on which is indicated the following info-
• Name of issuing company in foreign country
• Name of registered holder
• Number of depository shares held
• Name of custodian
• A summary of the depository agreement
• Benefits and responsibilities of the holder
Thank you