5.

1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

Syllabus
Unit 1: Impact of globalization on the Capital Markets
• Growing International integration
• Role of Media and Technology in Capital mobility
• Diversification benefit of global investment

Unit 2: Global international Bond Market

• Domestic Bonds, Euro Bonds and Foreign Bonds
• Participants in global bond markets
• Credit Rating Agencies and their role
• Procedure for issuing Euro Bonds

Unit 3: Global Equity Markets

• Major Stock Markets of the world
• Emerging Stock Markets
• International Equity Trading – Multiple listing
• Depository receipts

Unit 4: Obstacles of International Investments

• Information Barriers
• Foreign Exchange Risk
• Political Risks
• Taxation
• Other Regulatory barriers

References:
1. A History of the Global Stock Market: From Ancient Rome to Silicon
Valley, B.M. Smith, University of Chicago Press, 2004
2. Inter Market Technical Analysis, John Murphy, John Wiley & Sons, 1991
3. Global Portfolio Management for Institutional investor, Jeff Madura,
Greenwood Press, 1996
4. Global Asset Allocation, Robert Klein and Jess Lederman, John Wiley &
Sons, 1994.

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

Global capital markets: Entering a new era

The financial crisis and worldwide recession has abruptly halted a nearly
three-decade-long expansion of global capital markets. After nearly
quadrupling in size relative to GDP since 1980, world financial assets—
including equities, private and public debt, and bank deposits—fell by $16
trillion last year to $178 trillion in 2008, the largest setback on record.
MGI research suggests that the forces fueling growth in financial markets
have changed. For the past 30 years, most of the overall increase in financial
depth—the ratio of assets to GDP—was driven by rapid growth of equities and
private debt in mature markets. By 2007, the total value of global financial
assets reached a peak of $194 trillion, equal to 343 percent of GDP. But the
upheaval in financial markets in late 2008 marked a break in this trend.
Although the full ramifications of the financial crisis will take years to
play out, it is already clear that the financial landscape has shifted in
several ways. Most notably, MGI finds that:
• Falling equities accounted for virtually the entire drop in global
financial assets. The world's equities lost almost half their value in
2008, declining by $28 trillion. Markets have regained some ground
in recent months, replacing $4.6 trillion in value between December
2008 and the end of July 2009. Global residential real estate values
fell by $3.4 trillion in 2008 and nearly $2 trillion more in the first
quarter of 2009. Combining these figures, we see that declines in
equity and real estate wiped out $28.8 trillion of global wealth in
2008 and the first half of 2009.
• Credit bubbles grew both in the United States and Europe before
the crisis. Contrary to popular perceptions, credit in Europe grew
larger as a percent of GDP than in the United States. Total US credit
outstanding rose from 221 percent of GDP in 2000 to 291 percent in
2008, reaching $42 trillion. Eurozone indebtedness rose higher, to
304 percent of GDP by the end of 2008, while UK borrowing climbed
even higher, to 320 percent.
• Financial globalization has reversed, with cross-border capital flows
falling by more than 80 percent. It is unclear how quickly capital
flows will revive or whether financial markets will become less
globally integrated.
• Some global imbalances may be receding. The U.S. current account
deficit—and the surpluses in China, Germany, and Japan that helped
fund it—has narrowed. However, this may be a temporary effect of
the crisis rather than a long-term structural shift.
• Mature financial markets may be headed for slower growth in the
years to come. Private debt and equity are likely to grow more
slowly as households and businesses reduce their debt burdens and
as corporate earnings fall back to long-term trends. In contrast,
large fiscal deficits will cause government debt to soar.
• For emerging markets, the current crisis is likely to be no more than
a temporary interruption in their financial market development,

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

because the underlying sources of growth remain strong. For

investors and financial intermediaries alike, emerging markets will
become more important as their share of global capital markets
continues to expand.

GLOBAL CAPITAL MARKETS

1. Global financial stock is now $140 trillion and growing.

The value of total global financial assets—including equities,
government and corporate debt securities, and bank
deposits—expanded to $140 trillion by the end of 2005, an
increase of $7 trillion from a year earlier.

2. The depth of world financial markets rose to an all–time

high of 316 percent – more than three times world GDP.
With few exceptions, deeper financial markets create better
access to funding for companies, a theme confirmed by our
survey of business executives.
3. Equities are the top source of recent growth, increasing
by $7.1 trillion and accounting for nearly half of growth in
global financial assets in 2005. The vast majority of equity
market increases worldwide were due to increased earnings
and new issuance rather than increases in P/E ratios
4. Global cross–border capital flows topped $6 trillion, a new
record and more than double their level in 2002. Our data
shows that foreign investors hold one in four debt securities
and one in five equities, suggesting that national financial
markets are increasingly integrating into a single global
market for capital.
5. 80% of capital flows are between the US, UK, and euro
area. Although global capital flows to emerging markets are
growing rapidly, they still account for just 10 percent
of global capital flows.

• Growing International Integration:

INTRODUCTION
Capital markets are in the process of rapid evolution. Capital flows —
which were formerly directed towards banks and controlled by
Governments — are now held by individuals, institutions or private
mutual funds and can circulate freely and instantaneously to projects

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

which will yield the maximum profit. Electronic computerized data

transmission now gives them an unprecedented mobility on all the
financial markets on the planet. Moreover, the volume of such flows
has grown — tripling or increasing tenfold in the past few years —
mainly as a result of the success of mutual funds, whose assets often
exceed those of many Governments.

We will examine, in turn, the current evolution of capital markets and

the attempts made by Governments and international organizations to
regulate them, as well as the political and economic consequences of
the globalization of capital movements. Lastly, we will consider the
future prospects in an attempt to find an answer to the fundamental
question:
Will the sole purpose of the globalization of capital markets be
speculation, or can this globalization be mobilized to promote
economic growth, social progress and development?
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EVOLUTION OF CAPITAL MARKETS

A. Previous situation
In the past, rivalries between nations were resolved by means of
armed conflicts in which empires or ideologies clashed. Today, the
wars being waged seem increasingly to be removed from the principal
events taking place on the economic and financial front.

During the Cold War, the super-powers provided assistance in the form
of official financial flows or subsidies to centralized economic systems
and developing countries whose survival they ensured. Today, these
flows and subsidies have been considerably reduced or have even, in
some cases, disappeared, giving way to the laws of the market place
which govern growth, development, employment or decline.

B. Current situation
Today, the main problem facing Governments is how to attract new
investment with a view to creating jobs and promoting sustained
economic growth. Governments compete for capital.

To this end, nations vie with each other through variations in their
interest rates or their rates of exchange, and through the
competitiveness of their markets. The world has become capitalist and
the ever-increasing financial movements can reward savings and
productivity and thus strengthen a country’s economy. Conversely,

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

foreign capital can also abandon an economy or withdraw abruptly if

an unfavorable fiscal policy drives it away. Speculators may attack a
weak currency to weaken it still further. Capital movements may
penalize unproductive expenditure and thus help to destroy a
country’s economy. Governments and heads of enterprises therefore
strive to attract this capital by offering it favorable conditions and to
utilize it more productively than their rivals.

With the end of the Cold War, official subsidies and other financial
flows dried up in countries such as the Democratic People’s Republic of
Korea, Myanmar and Cuba, while investors preferred to steer their
capital to countries where the climate was more favorable to them,
such as the Republic of Korea, the Taiwan province of China and other
emerging countries. Capital has thus become more mobile and more
difficult to stabilize and control.

CONCLUSION:
The globalization of capital markets and the growth of trade will help to
create new surpluses which could meet the world demand for capital.
However, these financial resources, in search of an attractive rate of
remuneration, will be invested in countries which achieve a
fundamental balance in their public finances and introduce economic
and financial measures aimed at reducing budget deficits and current
payments, the rationalization and privatization of public enterprises,
the development of private savings and of the capital market, and the
liberalization of trade.

During the past decade, a growing number of developing countries,

emerging countries and economies in transition have introduced the
reforms necessary for the restoration of financial equilibrium. However,
the need to attract external financial flows which could contribute to
the creation of jobs and the growth of their economy required, in
particular, in the context of the globalization of capital markets, a
greater effort in favor of national capital markets. The development of
such markets, combined with national capacity building and the
establishment of institutions connected to the international financial
centres, would help to enhance the effectiveness of financial mediation
in the allocation of resources, to channel external flows, and to
increase and diversify the volume of medium and long term financial
resources necessary for the economic development of these countries.
Lastly, these flows, both internal and external, cannot fail to constitute
a source for the mobilization of additional resources through
appropriate taxation.

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

• Role of Media and Technology in Capital mobility

Capital mobility and comparative advantage

Some descriptions of comparative advantage rest on a necessary

condition of capital immobility. If financial or labor resources can move
between countries, then comparative advantage erodes, and absolute
advantage dominates. For instance, the Heckscher-Ohlin model derives
comparative advantage from differing relative abundances of capital
and labour between countries. Capital mobility and the competitive
drive for the highest return on investment would give all countries
identical relative abundances for new investment, eliminating
comparative advantage and trade.

Other conceptions of comparative advantage are sound in all instances

where the factors of production not homogenous between the parties
notwithstanding mobility factors.

Given the liberalization of capital flows under free trade agreements of

the 1990s, the condition of capital immobility no longer holds. David
Korten argues that the theory of comparative advantage "is replaced
by that of downward levelling". However, capital immobility is only one
route to comparative advantage, useful to basic models, but not
essential to it.

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

Basic models assuming capital immobility were convenient and not

essential to the principle. Although greater capital mobility is likely to
reduce comparative advantage, barriers to capital flows are not the
only way to derive it.

• Early qualitative descriptions of the principle were based on the

greater ease of producing different commodities in one country
than another, and not on capital mobility. The comparative
advantage of France over Iceland in wine production is not based
on capital immobility.
• Comparative advantage can be derived from more complicated
models including capital mobility (i.e. international borrowing,
lending, and labor movement) and often posit movement of
capital as analogous to the movement of goods

========================End of Unit:
1===========================

Unit 2: Global international Bond Market

• Domestic Bonds, Euro Bonds and Foreign Bonds
• Participants in global bond markets
• Credit Rating Agencies and their role
• Procedure for issuing Euro Bonds

Global Bond Market Size:

Amounts outstanding on the global bond market increased
10% in 2009 to a record $91 trillion.
Domestic bonds accounted for 70% of the total and
international bonds for the remainder. The US was the largest
market with 39% of the total followed by Japan (18%).
Mortgage-backed bonds accounted for around a quarter of
outstanding bonds in the US in 2009 or some $9.2 trillion. The
sub-prime portion of this market is variously estimated at
between $500bn and $1.4 trillion.
Treasury bonds and corporate bonds each accounted for a fifth
of US domestic bonds. In Europe, public sector debt is

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

substantial in Italy (93% of GDP), Belgium (63%) and France

(63%). Concerns about the ability of some countries to
continue to finance their debt came to the forefront in late
2009. This was partly a result of large debt taken on by some
governments to reverse the economic downturn and finance
bank bailouts.
The outstanding value of international bonds increased by 13%
in 2009 to $27 trillion. The $2.3 trillion issued during the year
was down 4% on the 2008 total, with activity declining in the
second half of the year.

• Domestic Bonds, Euro Bonds and Foreign Bonds

Domestic Bonds:
Domestic Bond is -
“a bond denominated in the currency of the country where it's issued.”
Indian Debt Market –
The Indian debt market is composed of government bonds and
corporate bonds. However, the Central government bonds are
predominant and they form most liquid component of the bond market.
In 2003, the National Stock Exchange (NSE) introduced Interest Rate
Derivatives.

The instruments traded can be classified into the following segments

based on the characteristics of the identity of the issuer of these
securities:

MARKET SEGMENT ISSUERS INSTRUMENTS

Central Zero Coupon Bonds, Coupon

Government Governments Bearing Bonds, Treasury
Bills, STRIPS
Securities
State Coupon Bearing Bonds
Governments

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

Government Govt. Guaranteed Bonds,

Agencies / Debentures
Public Sector Statutory Bodies
Bonds
Public Sector PSU Bonds, Debentures,
Units Commercial Paper

Corporates Debentures, Bonds,

Commercial Paper, Floating
Rate Bonds, Zero Coupon
Private Sector Bonds, Inter-Corporate
Deposits
Bonds Banks
Certificates of Deposits,
Financial Debentures, Bonds
Institutions
Certificates of Deposits,
Bonds

Price determination in the debt markets

The price of a bond in the markets is determined by the forces of

demand and supply, as is the case in any market. The price of a bond
also depends on the changes in:
 Economic conditions
 General money market conditions, including the state of
money supply in the economy.
 Interest rates prevalent in the market and the rates of new
issues
 Future Interest Rate Expectations
 Credit quality of the issuer

Debt Instruments in India are categorized as:

 Government of India dated Securities (G-Secs) are 100-
rupee face-value units/ debt paper issued by the Government of India

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

in lieu of their borrowing from the market. They are referred to as SLR
securities in the Indian markets as they are eligible securities for the
maintenance of the SLR ratio by the banks.

 Corporate debt market: The corporate debt market basically

contains PSU bonds and private sector bonds. The Indian primary
Corporate Debt market is basically a private placement market with
most of the corporate bonds being privately placed among the
wholesale investors, which include banks, financial Institutions,
mutual funds, large corporate & other large investors.
The following debt instruments are available in the corporate
debt market:
 Non-Convertible Debentures
 Partly-Convertible Debentures/Fully-Convertible Debentures
(convertible into Equity Shares)
 Secured Premium Notes
 Debentures with Warrants
 Deep Discount Bonds

Main participants in the retail debt market include mutual funds,

provident funds, pension funds, private trusts, state-level and district-level
co-operative banks, housing finance companies, NBFCs and RNBCs, corporate
treasuries, Hindu Undivided Families (HUFs), and individual investors.

The Indian bond market, however, is today at par with some of the
leading markets of Asia like Korea. The grapevine is that in a few
years, the Indian bond market will be counted as a renowned market of
the world .

We feel proud to recognise the bond market of India better than that of
China. And this is definitely an evidence of Indian economy’s quick
progression. Moreover, the Indian bond market is profitable to almost
anyone and everyone. The new business houses especially find the
Indian market profitable from an operational point of view. That is
pretty obvious as they have been able to initiate business in a very
short time span and generate capital easily.

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

Foreign Bonds:

Foreign Bond means –

A bond that is issued in a domestic market by a foreign entity,
in the domestic market's currency.
Since investors in foreign bonds are usually the residents of
the domestic country, investors find them attractive because
they can add foreign content to their portfolios without the
added exchange rate exposure.

Foreign bonds are a type of international bond. If a company issues bonds

in another country using any currency, the bonds are considered to be
international bonds. Foreign bonds are issued in a country other than the
originating country of the company issuing the bonds, using the currency
of the country in which the bond is issued. A bond traded outside the
company's country of origin but in the company's currency is not usually
considered to be a foreign bond. When they are not traded in Europe,
foreign bonds are often given names specific to the country of issue that
identifies where the bond is issued, especially if the country has a strong
market for bonds.

A bond is essentially a note of debt from the borrower to the lending

party. Whether a bond is foreign depends on the lender's country of
residence, the currency in which the bond is sold, and the country of
origin of the financial institution creating the bond. Bonds usually include
periodic interest payments that are paid to the buyer of the bond, which
means that the lender who received the bond will get a steady return in
interest paid from the bond if she carries the bond to the end of the term.
Borrowing entities using foreign bonds are often companies, but foreign
bonds can also be issued by governments, including countries, cities, and
states.

Foreign bonds are regulated by the domestic market authorities and

are usually given nicknames that refer to the domestic market in
which they are being offered.

A foreign bond (called Yankee bond in the US, Samurai bond in

Japan, Bulldog bond in the UK) is a bond issued in a country's
national bond market by an issuer not domiciled in that country where
those bonds are subsequently traded.

• Regulatory authorities in the country where the bond is issued

impose rules governing the issuance of foreign bonds.

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

• Issuers of foreign bonds include national governments and their

subdivisions, corporations, and supranationals (an entity that is
formed by two or more central governments through
international treaties).
• They can be denominated in any currency.
• They can be publicly issued or privately placed.

Euro-Bonds
Eurobonds have the following features:
• underwritten by an international syndicate.
• offered simultaneously to investors in a number of countries at
issuance.
• issued outside the jurisdiction of any single country. Therefore,
they are not registered through a regulatory agency.
• in practice they are typically registered on a national stock
exchange. Why? Some institutional investors are prohibited from
purchasing securities that are not registered on an exchange.
The registration is mainly intended to overcome such
restrictions. However, most of the Eurobond trading occurs in the
over-the-counter market.
• Make coupon payments annually.

Types of Eurobonds:

• There are a large variety of Eurobonds with different features.

For example, deferred-coupon bonds, step-up bonds, dual
currency bonds, etc.
• If an Eurobond is denominated in US dollars, it is called
Eurodollar bond. Example: A US$ bond issued by Ford and sold in
Japan.
• "Plain vanilla", fixed rate coupon bonds are called Euro straights,
which are unsecured bonds.

A global bond is a debt obligation that is issued and traded in both

the USYankee bond market and the Eurobond market. Issuers of global
bonds typically have high credit quality, and have large fund needs on
a regular basis. The first global bond was issued by the World Bank.

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

Example: A US$ bond issued by the Canadian government, and sold in

the US and Japan.

Sovereign debt is the obligation of a country's central government.

Compared withgovernment debt obligations by entities in a particular
country, sovereign debtof that country have lower credit risk and
greater liquidity. Government canraise funds by issuing foreign bonds,
Eurobonds and domestic bonds, or byborrowing from banks through
syndicated bank loans.

Governments use the following methods to issue new debt:

• Regular auction cycle/single-price method: this is the same

method used by the US Treasury.
• Regular auction cycle/multiple-price method: this method is
similar to the one used by the US Treasury, except that winning
bidders are awarded securities at the yield they bid, not at the
stop yield.
• Ad hoc auction method: auctions are announced when market
conditions are favorable.
• Tap method: bonds from a previously outstanding issue are
auctioned.

• Participants in Global Bond Market

Bond market participants are similar to participants in most financial
markets and are essentially either buyers (debt issuer) of funds or
sellers (institution) of funds and often both.
Participants include:
• Institutional investors
• Governments
• Traders
• Individuals

Because of the specificity of individual bond issues, and the lack of

liquidity in many smaller issues, the majority of outstanding bonds are
held by institutions like pension funds, banks and mutual funds. In the
United States, approximately 10% of the market is currently held by
private individuals.

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

• Credit Rating Agencies and their role

Credit rating is an important element for bond valuation.

Rating agency are external companies charged to assess the
overall credit of a given company and or bond issue.
The two main companies are:
 Standard & Poor's
 Moody's
Other less influential companies includes:
 Fitch/IBCA
 Thompson BankWatch.

Consulting the rating from these services ratings helps to determine

the issue's safety and security. Although it is not compulsory to rate an
issue, most issues are rated as they provide valuable market
information to potential investors. Rating agency may not be able to
rate a given issue if a company is to new and consequently does not
have sufficient credit history

Table 1 provides the rating convention of Standard & Poor's and Moody's.

CREDIT QUALITY S&P Moody’s

High quality bonds AAA+/AAA/AA Aaa1/Aaa2/Aaa3
AA+/AA/AA Aa1/Aa2/Aa3
A+/A/A A1/A2/A3

Medium grade BBB+/BBB/BB- Baa1/Baa2/Baa3

BB+/BB/BB- Ba1/Ba2/Ba3
B+/B/B- B1/B2/B3

Poor grade CCC+/CCC/CC- Caa1/Caa2/Caa3

CC+/CC/CC- Ca1/Ca2/Ca3
C+/C/C- C1/C2/C3

Default D C

Table 1: Rating convention of Standard & Poor's and Moody's

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

International Bond Market Credit Ratings:

 Fitch IBCA, Moody’s , Standard & Poor’s and DBRS sell credit
rating analysis.
 Focus on default risk, not exchange rate risk.
 Assessing sovereign government debt focuses on political risk and
economic risk.
 Economic risk: external debt, BOP flexibility, economic structure &
growth, management of the economy, and economic prospects.

Standard & Poor's is a credit rating agency (CRA), which issues

credit ratings for the debt of public and private corporations. It is one
of several CRAs that have been designated a Nationally Recognized
Statistical Rating Organization by the U.S. Securities and Exchange
Commission.
It issues both short-term and long-term credit ratings.

Role of Credit Rating Agencies

A credit rating agency (CRA) is a company that assigns credit
ratings for issuers of certain types of debt obligations as well as the
debt instruments themselves. In some cases, the servicers of the
underlying debt are also given ratings. In most cases, the issuers of
securities are companies, special purpose entities, state and local
governments, non-profit organizations, or national governments
issuing debt-like securities (i.e., bonds) that can be traded on a
secondary market.
A credit rating for an issuer takes into consideration the issuer's credit
worthiness (i.e., its ability to pay back a loan), and affects the interest
rate applied to the particular security being issued. (In contrast to
CRAs, a company that issues credit scores for individual credit-
worthiness is generally called a credit bureau or consumer credit
reporting agency.)

The value of such ratings has been widely questioned after the
2007/2009 financial crisis. In 2003 the Securities and Exchange
Commission submitted a report to Congress detailing plans to launch
an investigation into the anti-competitive practices of credit rating
agencies and issues including conflicts of interest.

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

Credit rating agencies (CRAs) play an important role in most

modern capital markets. The IOSCO Report on the Activities of
Credit Rating Agencies notes that CRAs assess the credit risk
of corporate and government borrowers and issuers of fixed-
income securities by analyzing relevant information available
regarding the issuer or borrower, its market, and its economic
circumstances.5 The information processed by the CRA, while
generally available to the public, may be costly and time-
consuming to collect and analyze. Some CRAs also may obtain
non-public information from borrowers and issuers as part of
the rating process. The conclusion derived from this analysis is
reflected in a credit rating. This rating represents an opinion
as to the likelihood that the borrower or issuer will meet its
contractual, financial obligations as they become due and is
not a recommendation to buy or sell a security. It also does not
address market liquidity or volatility risk.

CRAs first issued ratings for mortgage-backed securities in the

mid-1970s. In subsequent years, they began rating other types
of asset-backed securities, including those collateralized by
credit card receivables, auto loans, student loans, and
equipment leases. They started rating cash CDOs in the late
1990s and synthetic CDOs in the early 2000s. Not all
structured finance products are rated by CRAs. Indeed, for
many particularly complicated or risky CDOs, credit ratings are
unusual. Further, some issuers create structured products
specifically for a particular investor that does not require a
credit rating because it relies solely on internal analytics to
assess the credit risk of the security. As with corporate debt
securities, many investors require that a structured finance
debt security be rated by a CRA before they will purchase it.

• Procedure for issuing Euro Bonds

Eurobonds are named after the currency they are denominated in. For
example, Euroyen and Eurodollar bonds are denominated in Japanese
yen and American dollars respectively. A Eurobond is normally a
bearer bond, payable to the bearer. It is also free of withholding tax.
The bank will pay the holder of the coupon the interest payment due.
Usually, no official records are kept.

The first European Eurobonds were issued in 1963 by Italian motorway

network Autostrade. The $15 million loan was arranged by London
bankers S. G. Warburg

Prof. Abdul K Khan

5.1 GLOBAL CAPITAL MARKETS TY-BFM (Sem-5)

How MNCs Issue Eurobonds ??

To increase investor interest, a MNC can have its eurobond issue
underwritten by a bank, which obligates those banks to provide any
shortcoming in principal. In addition, banks are paid fees to distribute
the eurobonds to investors, to attend road shows to generate investor
interest and to prepare an information memorandum and prospectus,
setting out details of the eurobond, the MNC and the purpose for the
funds.

========================End of Unit
2===========================

Prof. Abdul K Khan