3. Financial Globalization Financial globalization, by definition, means the integration of financial markets of all countries of the world into one The Globalization of Finance means the flow of capital and corporate investments between various countries The need for a single currency
9. The effect of the introduction of the euro Trade - The introduction of the euro is that it has increased trade within the euro area by 5% to 10% Investment - Physical investment increased by 5% The intra-Eurozone FDI stocks have increased by about 20% Financial integration - It has “significantly reshaped the European financial system, especially with respect to the securities markets”
12. Financial globalization and financial sector development Two main channels through which financial globalization promotes financial development. new type of capital and more capital are available to developing countries financial globalization leads to a better financial infrastructure
13. Foreign Direct Investments Foreign direct investment (FDI) in its classic form is defined as a company from one country making a physical investment into building a factory in another country. It is the establishment of an enterprise by a foreigner. For an investment to be regarded as an FDI, the parent firm needs to have at least 10% of the ordinary shares of its foreign affiliates. The investing firm may also qualify for an FDI if it owns voting power in a business enterprise operating in a foreign country.
14. Does Foreign Direct Investment Help Emerging Economies? Bridges the gap between the world’s rich and poor countries FDI’s Stability FDI and Trade FDI, Savings and Investment
15. Examples of FDI POSCO setting up a steel plant in Orissa (in-bound FDI Alliance Insurance MetLife Barclays Bank of america vodafone which has a 52% stake in hutch(now vodafone)
16.
17. CURRENT FINANCIAL GLOBALISATION INVESTMENT SCENARIO IN INDIA INWARDS- India is being ranked as the second most favored destination for foreign investments after China by showing a growth year after year. As per the figures released by Department of Industrial Policy and Promotion (FDI) inflows during 2008-09 (from April 2008 to March 2009) stood at approx. US$ 27.3 billion and inflows for the last quarter alone of 2008-09 stood at approx. US$ 6.2 billion
18. OUTWARD As per the figures released by Reserve Bank of India the total outward investment from India, excluding that were made by individuals and banks, rose 29.6 per cent to US$17.4 billion in 2007-08. The second highest foreign employer in the UK is India after the US With various mergers and acquisitions Indian businessmen are expanding their horizons and creating a mark in the International arena. Companies like Apollo Tyres, Eveready Industries etc are among some of the companies which are investing abroad.
19. ADR & GDR American depository receipt Global depository receipt
20. American Depository Receipt (ADR) An American Depository Receipt (ADR) is a stock which trades in the United States (US) but represents a specified number of shares in a non-US corporation (like Infosys, etc). ADRs are bought and sold on American stock markets just like regular stocks, and are issued/sponsored in the U.S. by a bank or brokerage.
21. Global Depository Receipt - GDR If the depository receipt is traded in a country other than USA, it is called a Global Depository Receipt, or a GDR
22. CONCEPT OF ADR & GDR The company deposits a large number of its shares with a bank The bank issues receipts against these shares Each receipt having a fixed number of shares as an underlying (Usually 2 or 4) These receipts are then sold to the people of this foreign country (and anyone who is allowed to buy shares in that country). These receipts are listed on the stock exchanges.
26. Advanced countries and financial globalization Aid or Trade Doing Good Is Also Doing Well Hypocrisy of Rich Countries
27. FOREIGN INSTITUTIONAL INVESTORS FII is used to denote an investor, who invests money in the financial markets of a country different from the one in which that investor is incorporated
28. INTRODUCTION Foreign Investments Investments made by residents of a country in financial assets and production processes of another country
29. FIIs Who are they ? Institutions like pension funds ,mutual funds, investment trusts, asset management companies, nominees companies and incorporated portfolio managers
30. FIIs Where they can invest? Under securities such as shares, debentures and warrants issued by Indian companies which are listed /to be listed on the Stock exchange in India The schemes floated by domestic mutual funds, traded on the primary and secondary markets. In government securities including treasury bills and debt securities of Indian companies.
31. POSITIVE ASPECTS OF FII Improving capital markets FIIs as professional bodies of asset managers and financial analysts enhance competition and efficiency of financial markets Equity market development aids economic development. By increasing the availability of riskier long term capital for projects, and increasing firms’ incentives to provide more information about their operations, FIIs can help in the process of economic development.
32. POSITIVE ASPECTS OF FII Improved corporate governance FIIs constitute professional bodies of asset managers and financial analysts, who, by contributing to better understanding of firms’ operations, improve corporate governance. Bad corporate governance makes equity finance a costly option. Institutionalization increases dividend payouts, and enhances productivity growth.
33. EXAMPLES OF FII INVESTMENTS J P Morgan Securities and Morgan Stanley & Co have jointly invested US$ 103 million in the ADS (American Depositary Shares) offering of Sterlite Industries. Shareholding pattern (April-June quarter) of public sector unit (PSU) companies reveal that FIIs have been big buyers in PSU banks. FII holdings in Central Bank, Vijaya Bank, Union Bank, IDBI Bank, Indian Overseas Bank, SBI and term lenders IFCI and IDFC have gone up significantly during the first quarter of FY 2009-10. A clutch of foreign and domestic institutional investors and mutual funds have acquired stakes in engineering firm Texmaco—a K K Birla group company—through a recently completed US$ 37.3 million qualified institutional placement (QIP). Canadian investment firm, Urbana Corporation, is likely to buy a 5 per cent stake in the National Stock Exchange, India’s largest bourse.
34. The US-based private equity fund major, Fire Capital, has earmarked US$ 500 million equity investment to be spent over a period of five years on various realty projects, particularly on integrated townships, across the country. Investors, such as ATE Enterprises, Denmark-based Best Seller, Sequoia Capital, the Netherlands-based Cordaid etc., from the US and European countries are keen to invest around US$ 420.84 million to promote and equip small and medium enterprises engaged in green business, according to New Ventures India (NVI).
35.
36.
37. Established in 1944 Organization of 184 countries Surveillance Medium turn loans Technical assistance Decision’s are taken by 24 member board U.S,U.K,France,Japan ,Germany, China,Russai and Saudi Arabia INTERNATIONAL MONETORY FUND
38. IMF taken the role as a international lender of government (LATIN AMERICA) The role of IMF increased during the financial crises in ARGENTINA in 2001 -2002 MEXICO in 1994-1995 EAST ASIA in 1997-1998
39. Major shifts in economic policy THE ADAPTION OF CONVERTIBILITY PLAN Convertibility plan fails to make labor and product market flexible and also fails to promote fiscal responsibility Convertibility plan is the main reason for down fall of argentine economy ARGENTINA 2001-2002
