...of funds. CTC can raise funds within Chile, but there is doubt that the country's financial market can fully finance 100 per cent of the fund requirements of the telecommunications giant. First, the local stock market is relatively small. Second, Chilean banks are small and that they are legally restricted from committing majority of their funds to just one company, and also if they are allowed to do so, that would mean a very high exposure to CTC alone. American Depositary Receipt (or ADR) Thus, CTC is forced to look for the funds it needs outside Chile. One option is through the issuance of American Depositary Receipts (or ADR). According to the Chartered Financial Analyst (CFA�) Institute (2008), an ADR is a "certificate of ownership issued by a U.S. bank to promote local trading in a foreign stock" (p. G-2). This means that the United States' bank holds the foreign shares of stocks and issues American Depositary Receipts against them which it then sells to American investors. US investor wishes to own ADRs in that...
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...Table of Contents Capital Account Transactions Pages 03 to 08 FEMA Regulations – Capital Account Types of Capital A/c Transactions Foreign Institutional Investors Pages 09 to 11 Foreign Direct Investment Pages 12 to 15 American Depository Receipts Pages 16 to 17 Global Depository Receipts Pages 18 to 19 External Commercial Borrowings Pages 20 to 21 Foreign Currency Convertible Bonds Pages 22 to 25 Capital Account Convertibility Pages 26 to 28 Tarapore Committee and Current Status Pages 29 to 35 What is Capital Account Transaction? Capital account transaction is defined as a transaction which:- ➢ Alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India. In other words, it includes those transactions which are undertaken by a resident of India such that his/her assets or liabilities outside India are altered (either increased or decreased). For example:- (i) a resident of India acquires an immovable property outside India or acquires shares of a foreign company. This way his/her overseas assets are increased; or (ii) a resident of India borrows from a non-resident through External commercial Borrowings (ECBs). This way he/she has created a liability outside India. ➢ Alters the assets or liabilities in India of person resident...
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...sources of funds. CTC can raise funds within Chile, but there is doubt that the country’s financial market can fully finance 100 per cent of the fund requirements of the telecommunications giant. First, the local stock market is relatively small. Second, Chilean banks are small and that they are legally restricted from committing majority of their funds to just one company, and also if they are allowed to do so, that would mean a very high exposure to CTC alone. American Depositary Receipt (or ADR) Thus, CTC is forced to look for the funds it needs outside Chile. One option is through the issuance of American Depositary Receipts (or ADR). According to the Chartered Financial Analyst (CFA©) Institute (2008), an ADR is a “certificate of ownership issued by a U.S. bank to promote local trading in a foreign stock” (p. G-2). This means that the United States’ bank holds the foreign shares of stocks and issues American Depositary Receipts against them which it then sells to American investors. US investor wishes to own ADRs in that it...
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...Page 1 – JPMorgan Depositary Receipt Guide 1. Introduction and market snapshot……………………………………………………………………….3 2. Depositary Receipt Structures……………………………………………………………………………..9 3. The JPMorgan Advantage…………………………………………………………………………….……..17 4. Establishing your Depositary Receipt Program…………………………………………….….22 5. Maintaining your Depositary Receipt Program……………………………………..…….….31 6. Legal and Regulatory Framework…………………………………………………………..………..38 7. Glossary……………………………………………………………………………………………………………….57 Page 2 – JPMorgan Depositary Receipt Guide Increasing globalization and investor appetite for diversification offer a unique opportunity to companies looking to tap a new investor base, expand awareness, or raise capital. By creating a depositary receipts program, you gain the flexibility and access you need to achieve your company’s strategic goals. Depositary receipts hold special appeal for investors because they make investing in a company beyond the investor’s home borders easy and convenient. That ease fuels investor appetite, which in turn has driven explosive growth in the depositary receipt market. Companies from more than 80 countries have gained new investors outside their home markets. More than 2,100 issuers have issued depositary receipts. 500 depositary receipt programs are listed on US exchanges, providing the issuing company with important access to new capital. Depositary receipts account for 16% of the entire US equity market.* Since JPMorgan established the first...
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...Global Depository Receipts American Depository Receipts External Commercial Borrowings Debt Indian Depository Receipts EURO ISSUES The international capital market is a huge source of capital. At a time when the Indian economy is gearing up to meet the challenges of being an open economy, it assumes of greater significance. Up to 1991, Indian companies were not allowed to raise capital from overseas capital market. For their foreign exchange requirements, they had to depend on government financial institutions, foreign banks, international development agencies etc. By the middle of 1991, the process of liberalization of Indian economy was set in motion by the government and now the Indian Corporate is allowed to issue equity or bonds in overseas capital market. The term ‘Euro Issue’ denotes that the issue is made abroad through foreign currency denominated securities and the securities are listed on any overseas stock exchange. The Indian companies get their issues listed on LUXEMBOURG stock exchange. Subscription for such securities can come from any part of world, except India. Companies making Euro Issue can issue depositary receipts, foreign currency convertible bonds or pure debt bonds. Pure debt is not preferred by the investors for two reasons: (i) No Capital appreciation, and (ii) low credit rating of India by various international agencies. Depository receipts and foreign currency convertible bonds are more popular among the investors. Depository receipts are of two types:...
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...Asia in 2002, Frost & Sullivan Excellence in Leadership award for 2008 etc. Raju furthered the cause of social transformation through Byrraju Foundation, the largest voluntary non-government organization in India. Emergency Medical and Research Institute delivers free medical, police, fire services The company’s core values - efficiency, flexibility, trust, and reliability dissolved at once when Raju admitted in his horrifying confession on how he faked the company’s revenues and profits for several years. His revelation shocked not only employees and investors but also corporate India as well. The repercussions of fraud were felt not only by the Indian IT industry but also by overseas investors who had invested heavily in American Depository Receipts (ADR) issues of major Indian IT companies including Satyam. Raju was popular as visionary, strategist, risk taker. For insiders he was charismatic, reverent, participative, people friendly, approachable and great thinker. This is case of how important it is for a...
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...Week 10 Melco Crown Entertainment – American Depository Receipts (Macau) Key Issue: Melco is currently the company that is asking for advice on what means they should use to raise capital with their projects based in Macau. The reason Melco is looking for new ways of funding is due to their current project on two casino resorts in Macau being stopped due to lack of funds. It is believed that US$1.6 billion is what is needed to complete the construction on the casinos however a portion of that, US$350 million is what is needed to get the project back underway. The strategy that is chosen needs to be versatile enough that not only will it help in restarting the casino projects but it also needs to be flexible enough for long term funding. Key Alternatives: Melco has various options in terms of financing their construction project with possibilities of looking at funding in both the domestic markets within Hong Kong, as well has being able to source funding from international markets such as the US. To get a better idea of which market would be the most suitable for Melco the various possibilities need to be compared as well as taking other factors internal and external factors into account. MCEL has stated that raising capital through equity would not be the worst option and they are open to this, provided the joint venture remains evenly split between PBL and Melco whilst also not relinquishing enough shares in order to remain majority shareholders. Domestic possibilities:...
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...Case 3 Question 1 The Nestle Group would like to partially list one of its largest non-food holdings, Alcon, for several reasons. Nestlé’s top executives would like to discover the true valuation for each of the company’s holdings on a separate basis. Up until now, Nestlé’s EBITDA figure represented Nestlé as a group, not independent of its non-food holdings. While this measure was comparable with others in the industry, the executives felt that it was not truly representative of either Nestlé or Alcon. Although small in comparison to Nestlé, Alcon’s growth and profitability had outpaced the Nestlé Group as a whole and, thus, could possibly skew investors’ true valuation of both companies. By listing Alcon, the executives believe that there would be no better way to shed Alcon of its buried position under Nestlé’s food and beverage division. This way, the market can naturally decide the value of Nestlé amongst the expansive food and beverage industry and Alcon amongst the niche ophthalmology industry. At the time of this debate, Nestlé was trading at a discount relative to other similar corporations in the food and beverage industry. The executives credited this to the fact that the non-food divisions of Nestlé, such as Alcon and L’Oreal, were incorporated in Nestlé’s food and beverage market valuation. Listing Alcon would therefore force analysts to break down Nestlé into its divisions and allow the food and beverage division to stand on its own. Once the executives were...
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...Global depository receipt (GDR) is compulsory for foreign company to access in any other country’s share market for dealing in stock. But American depository receipt (ADR) is compulsory for non –us companies to trade in stock market of usa . 1. ADRs can get from level -1 to level –III. GDRs are already equal to high preference receipt of level –II and level –III. 2. Indian companies prefer to get GDR due to its global use for getting foreign investment for own business projects. 3. ADRs up to level –I need to accept only general condition of SEC of USA but GDRs can only be issued under rule 144 A after accepting strict rules of SEC of USA . 4. GDR is negotiable instrument all over the world but ADR is only negotiable in USA . 5. Many Indian Companies listed foreign stock market through foreign bank’s GDR.Names of these Indian Companies are following :- (A) Bajaj Auto (B) Hindalco (C) ITC ( D) L&T (E) Ranbaxy Laboratories (F) SBI Some of Indian Companies are listed in USA stock exchange only through ADRs :- (A) Patni Computers (B) Tata Motors 6. Even both GDR and ADR is the proxy way to sell shares in foreign market by India companies ADRs is not substitute of GDRs but GDRs can use on the place of ADRs . 7. Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities . Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ (National Association...
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...INVESTMENT BANKING Submitted to Prof. Vaibhav Banjan Group members- Kunal Tambe Diptesh Mayur Prasad Dube Kunal Sharma I. INVESTMENT BANKING: Investment banking, or I-banking, as it is often called, is the term used to describe the business of raising capital for companies and advising them on financing and merger alternatives. Capital essentially means money. Companies need cash in order to grow and expand their businesses; investment banks sell securities to public investors in order to raise this cash. Generally, the breakdown of an investment bank includes the following areas: * Corporate finance The bread and butter of a traditional investment bank, corporate finance generally performs two different functions: 1) Mergers and acquisitions advisory and 2) Underwriting. On the mergers and acquisitions (M&A) advising side of corporate finance, bankers assist in negotiating and structuring a merger between two companies. If, for example, a company wants to buy another firm, then an investment bank will help finalize the purchase price, structure the deal, and generally ensure a smooth transaction. The underwriting function within corporate finance involves shepherding the process of raising capital for a company. In the investment banking world, capital can be raised by selling stocks or bonds (as well as some more exotic securities) to investors. * Sales: Sales are another core component of any investment bank. Salespeople take the form of: 1) the classic...
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...ICSID’s member States.) Petrobras When founded in 1953, Petrobras, Brazil's state-controlled oil company, was a vital symbol of national pride. "The oil is ours" was an oft-repeated slogan. The company was incorporated as a mixed-capital company1 with a government-granted monopoly for all crude oil and gas production, refining and distribution in Brazil. In 1997, Brazil enacted the so-called “Petroleum Law” to end the oil monopoly and open the oil and gas markets in Brazil to foreign investment. Restrictions on ownership by non-governmental entities of shares in Petrobras were lifted and foreign ownership of shares was permitted. In response to these changes, in August 2000, Petrobras was partially privatized through a listing of its shares (ADRs*) on the NYSE. As part of the company’s new strategy, it also sought additional opportunities to expand abroad. Petrobras’ International Expansion Petrobras’ goals of diversification and international expansion were shared by many companies in the oil industry, but Petrobras’ need to diversify and expand was particularly acute because 95% of its upstream revenues** were exposed to the risks of a single country, Brazil.2 “We need to diversify our portfolio of assets and generate hard currency cash flow, reduce costs of capital, and...
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...INTERNATIONAL FINANCIAL MARKETS Topic 1 THE STRUCTURE OF THE INTERNATIONAL FINANCIAL SYSTEM Agenda Recent developments in international financial markets The components of the international financial market The eurocurrency market The international equity market The international debt market The foreign exchange (currency) market Globalisation of financial markets The global economy has undergone through a number of structural changes in the past few decades: Real changes liberalization of product and factor markets, allied with technological developments increased output in many countries and particularly in the previously centrally planned economies Monetary changes a global commitment to maintain low rates of inflation after the boost in inflation in the ’70s Financial changes growing completeness and integration of world financial markets, fueled by deregulation and technology 3 Globalisation of financial markets Realities of global financial markets: Short-term nature of capital flows High turnover in financial markets Multiplicity of agents High number and complexity of instruments High speed with which market participants react to new information Global reach of financial institutions Implications: Growing integration of financial markets, including emerging markets Better financing of current account deficits Financial contagion risks 4 How developed are the world’s...
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...categories, namely (a) Services-travel, transportation, insurance, Government not included elsewhere (GNIE) and miscellaneous (such as, communication, construction, financial, software, news agency, royalties, management and business services); (b) Income; and (c) Transfers (grants, gifts, remittances, ets.) which do not have any quid pro quo. 4.3. Under the Capital Account, capital inflows can be classified by instrument (debt or equity) and maturity (short or longterm). The main components of the capital account include foreign investment, loans and banking capital. Foreign investment, comprising Foreign Direct Investment (FDI) and Portfolio Investment consisting of Foreign Institutional Investors (FIIs) investment, American Depository Receipts/Global Depository Receipts (ADRs/GDRs) represents non-debt liabilities, while loans (external assistance, external commercial borrowings and trade credit) and banking capital, including non-resident Indian (NRI) deposits are debt liabilities. 4.4. The data on merchandise trade are available from two sources namely; (a) from the Directorate General of Commercial Intelligence and Statistics (DGCI&S) on customs basis; and (b) from RBI...
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...Chinese Companies’ Reaction to The Delisting Announcement Background The United States is one of the world’s most attractive places for a company to go public, especially for those mainland Chinese companies with funding needs. U.S. market gives those companies a chance to raise huge amounts of capital after their unsuccessful attempts to get bank borrowings in China. And compared with the traditional initial public offering process in the Chinese stock market, listing via reverse merger in the U.S. market seems to be much less expensive and time-consuming because mainland Chinese banks and China’s domestic capital market usually prefer the state-owned enterprises rather than privately owned companies. There are three major reasons for Chinese companies to list in the U.S.: First, the listing standards are lower in the U.S. Many Chinese Internet companies such as RenRen and YouKu did not meet Shanghai or Hong Kong listing standards at the time of their U.S. IPOs. They can either go public in the U.S. market or wait at least one year to meet the listing standards for Chinese exchange. The Second reason is that those international investors such as venture capital firms prefer to invest in the U.S. market because it offers them an access to convertible currency and freely tradable shares. The last reason is branding. Investors have always shown willingness to pay high prices for those Chinese stocks being listed in the U.S. market. It seems that there is prestige...
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...Abstract Like any other form of business or enterprise, investing internationally is a risk that can be turned into opportunity once well managed. There is a veritable sea of benefits in international portfolio investment. These include participation in the growth of other countries, hedging against exchange rate exposure to risk, diversification benefits and advantages (abnormal returns) of market segmentation on a global scale. However, we cannot be so overwhelmed by the payoff of international portfolio investment as to overlook the bitter side of it. In an international environment, financial investments are not only subject to currency risk and political risk, but also to many institutional constraints and barriers. What are crucial in international portfolio investment are optimal portfolio allocation and the associated market and currency risks. Diversification into multiple securities can practically eliminate potential severe losses from any individual security. However, domestic diversification cannot remove systematic market risk due to high correlations among most domestic securities. Since market risk differs from country to country, international diversification can reduce substantially the overall risk exposure of investment portfolios. Introduction and Overview Increased global competition and opportunity have attracted many national economies and individual domestic businesses to the international markets. In recent...
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