Chapter 09

“INTERNATIONAL EQUITY MARKET”

International Finance

Learning Objectives

After completing this chapter, you should be able to understand:

What do you mean by Foreign CapitalInternational Equity Capital

Global Depository ReceiptAmerican Depository ReceiptIndian Depository ReceiptForeign Direct InvestmentForeign Portfolio InvestmentHot MoneyParticipatory Notes

“International Equity Market”

Structure

9.1 Introduction to Foreign Capital9.2 Need for Foreign Capital9.3 International Equity Market9.4 Concept of Depository Receipt9.5 Global Depository Receipt (GDR)9.6 American Depository Receipt (ADR)9.7 Comparison Between Different Levels of ADR9.8 Advantages of ADRs and GDRs9.9 Distinction Between GDR & ADR9.10 Indian Depository Receipt9.11 Foreign Currency Convertible Bonds (FCCB)9.12 Foreign Currency Exchangeable Bonds (FCEB)


Structure

9.13 Distinction Between FCCB and FCEB9.14 Distinction Between FDI & FPI9.15 Hot Money9.16 Participatory Notes9.17 Fungibility9.18 Foreign Direct investment in India9.19 Factors Contributing to the Slow Flow of FDI into

India9.20 Foreign Investment Promotion Board (FIPB)9.21 Foreign Investment Promotion Council (FIPC)9.22 Summary9.23 Self Assessment Questions


9.1 Introduction to Foreign Capital

Foreign capital refers to the investment of capital by aforeign government, institution, private individual andinternational organization in a country.Foreign capital includes foreign aid, commercialborrowing and foreign investment. Foreign aidincludes foreign grants, concessional loans etc.Foreign capital is invested in the form of foreigncurrency, foreign machines, and foreign technicalknow-how.

Foreign CollaborationsLoan in Foreign CurrencyInvestment in Equity Capital


Foreign capital

9.2 Need for Foreign Capital

Increase in resources:Foreign capital not only provides an addition to thedomestic savings and resources, but also an additionto the productive assets of the country. The countrygets foreign exchange through FDI. It helps to increasethe investment level and thereby income andemployment in the recipient country.Risk taking:Foreign capital undertakes the initial risk ofdeveloping new lines of production. It has with itexperience, initiative, resources to explore new lines. Ifa concern fails, losses are borne by the foreigninvestor. “International Equity Market”


Technical Know How:Foreign investor brings with him the technical andmanagerial know how. This helps the recipient countryto organize its resources in most efficient ways i.e. theleast costs of production methods are adopted. Theyprovide training facilities to the local personnel theyemploy.High Standards:Foreign capital brings with it the tradition of highquality, higher real wages to labour and soundbusiness practices. This serves the interest of theinvestor and brings up quality / efficiency of localenterprises. “International Equity Market”


Marketing facilities:Foreign investor provides new marketing outlets, startsimports and exports among units located elsewhere.Reduces trade deficits:Foreign capital helps host country to increase exportsby raising quality and lowering costs and thereby,reduce trade deficit.Increases competition:Foreign capital may help to increase competition andbreak domestic monopoly. Foreign capital is a goodbarometer of world’s perception of a country’spotential.


9.3 International Equity Market

Until the end of 1970’s, international capital marketmainly focused on debt financing, but equity financingwas raised only by corporates in the domestic marketsas there were restrictions on cross border equityinvestments.

Early 1980’s witnessed Liberalization andGlobalization of many domestic economies. This gavea boost to the developing countries where issue ofdollar or foreign currency denominated equity shareswere not permitted. Now they are able to accessinternational equity markets through DepositoryReceipts.


9.4 Concept of Depository Receipt

1. A Depository Receipt is a negotiable certificateissued by a depository bank that represents thebeneficial interest in shares issued by a company.

2. These shares are deposited with a local custodianappointed by the depository, which issues receiptsagainst the deposit of shares. Each of thesedepository receipts represents a specified numberof shares in the domestic market.

3. According to the placement planned, depositoryreceipts are classified into three categories, asfollows.




American Depository Receipt (ADR) which are issued only to

investors in America


4. The main objectives of a company going for aninternational capital market are:

1. the size of the fund that can be raised.

2. currency choice.

3. large shareholder base

4. international brand image ; and

5. presence that emerges out of the issue.


9.5 Global Depository Receipt (GDR)

GDR is a negotiable instrument inthe form of depository receipts orcertificate created by the overseasdepository bank outside India andissued to non-resident investoragainst the issue of ordinary sharesof Foreign Currency ConvertibleBonds (FCCB) of the issuingcompany.



A. The Characteristic Features

GDR’s are issued to investors in more than onecountry and may be denominated in any acceptablefreely convertible currency.

The equity share holder may deposit the specifiednumber of shares and obtain the GDR and vice versa.

A typical GDR is denominated in any foreign currencywhereas the underlying shares would be denominatedin the local currency of the issuer. The holder isentitled to the dividend, bonus on the value of sharesunderlying the GDR.



A. The Characteristic Features- contd.

GDR may be, at the request of the investor, convertedinto equity shares by cancellation of GDR’s throughthe intermediation of the depository and the sale ofunderlying shares in the domestic market through thelocal custodian. This provision can be used after a‘cooling off’ period of 45 days from the date of issue.

GDR’s are considered as common equity of the issuingcompany. The company effectively transacts with onlyone entity; i.e. the overseas depository for all itstransactions.



A. The Characteristic Features- contd.

The foreign currency funds acquired by the companythrough a GDR issue are permitted to be used for anynormal business activity, but cannot be used fortrading in international securities or real estate.

Indian companies with good financial track record ofthree years are readily allowed access to internationalmarkets through such issues. Clearances are requiredfrom the Foreign Investment Promotion Board (FIPB)and the Ministry of Finance.



B. Advantages of a GDR issue:

GDR holders do not acquire voting rights and,therefore, the promoters are not in the danger oflosing management control.

Companies having international operations are able tobuild brand image which helps in their marketingefforts.

Investors have the benefit of having access to goodquality companies in other countries without politicalrisk, operational risk and excessive regulatory control.



B. Advantages of a GDR issue: contd.

Through a GDR issue the company isable to create a potential demandfor its shares at the internationallevel which results in highervaluation for its shares in thedomestic market. This increasescompany’s P/E ratio which in turnreduces the cost of capital.



C. Mechanism of Issue:


Listing on Stock

ExchangeCustodian

Bank

Depository Bank

Lead Manager

Issuing Company

Investor / Deposit Receipt

Holder

Book Runners

It’s a nine step process.

#1

#2

#3

#4

#6

#8

#9


C. Mechanism of Issue: contd.

Step 01: The domestic company wishing to issueequity shares favoring international investors is called‘The Issuing Company’

Step 02: The issuing company appoints aninternational merchant bank to act as a lead managerrequired to market the issue to international investorsby conducting “Road Shows” with respect tobackground, financial status and future prospects ofthe issuing company.




Step 03: After the road shows the lead managerarranges “book runners” who are specialized agenciesfor establishing and analyzing investor response to theissue, the purpose being to help the issuing companyto price the issue at an appropriate level.

Step 04: After issue price is decided, the leadmanager collects subscription money from potentialinvestors and after deducting their fees transfers thecollected amount to the depository bank.




Step 05: The issuing company now issues physicalshares in favour of the depository bank.

Step 06: These shares issued in favour of thedepository bank are submitted with the domestic bankof the issuing company which is also called custodianbank.

Step 07: The custodian bank then confirms thereceipt of underlying shares issued by issuingcompany in favour of depository bank.




Step 08: As soon as depository bank receives theconfirmation from the custodian bank, it issues GDR’sto the investors /deposit receipt holders.

Step 09: The issuing company helps the depositorybank to arrange listing of the GDR’s. Most Indiancompanies list the GDR’s on the international stockexchanges in London, and Luxemburg.

This helps investors to freely trade on GDR’s.“International Equity Market”


D. Participants Involved in GDR Issue:


Brokers

Custodian

Depository

Investment Bankers

Lawyers

Accountants

Issuing Company


D. Participants Involved in GDR Issue: contd.

1. Issuing Company-1. Determine financial objective.2. Appoint depository bank, lawyer, investment

bank and accountants.2. Lawyers-

1. Advise on applicable securities laws and relatedmatters.

2. Advise on GDR program (legal) structure.3. Investment Bankers

1. Lead underwriting process.2. Establish syndicate of participating bankers.




4. Depository Bank-1. Advise on GDR program structure.2. Appoint local custodian.

5. Custodian Bank-1. Act as a local market agent for the depository.2. Receive and hold deposits of underlying

ordinary shares for GDR issuances.




6. Accountants –1. Prepare financial statements in accordance

with relevant international accountingstandards, review and audit offer circular offinancial disclosure.

7. Brokers –1. Make GDRs available to qualifying investors


9.6 American Depository Receipt (ADR)

Till 1990s the companies had to issue separatedepository receipts for markets in each country, ADRfor US and EDR for European market.There was no cross border trading possible, as ADRsand EDRs could be traded, settled and cleared in USand European markets respectively.However, since 1990, non-US companies could raisecapital in the US market with registration with SEC(Securities Exchange Commission).

ADR is a dollar denominated negotiable certificate that represents a non-US company in US the market. They allow

US citizens to invest in overseas securities.



ADRs can be diagrammatically represented as follows:


Types of ADR

SponsoredUn-

Sponsored

Restricted

Regulation “S”

Section 144A

Level 3Level 2Level 1

A B

B1

B2

B3

B4

B4a B4b

9.6 American Depository Receipt (ADR)Unsponsored ADR:

Unsponsored ADRs are issued by one or moredepository banks based on market demand.Unsponsored ADRs are issued without the cooperationof the foreign company, but it has to be reportingcompany as per US Exchange Act of 1934.

Sponsored ADR:Sponsored Level 1 ADR Program:

This is the first step for an issuer. In this instrumentonly minimum disclosure is required by the SEC. Theissuer is not allowed to raise fresh capital or list itselfon any of the National Stock Exchanges.


A

BB1


Sponsored ADR:Sponsored Level 2 ADR Program:

The Company is allowed to enlarge the investor basefor existing shares to greater extent. But significantdisclosure has to be arranged. The Company now cantest itself on American or New York Stock Exchange.

Sponsored Level 3 ADR Program

This level is to raise fresh capital through publicoffering in the US capital market.


B

B3

B2


Sponsored ADR:

Restricted ADR

In addition to the sponsored ADR issues a companycan also access the US and other capital marketsthrough ADR program falling under rule 144 orregulation ‘S’ of the SEC.

These issues have certain limitations in terms oftarget investors etc.


B

B4

9.6 American Depository Receipt (ADR)Restricted ADR

Rule 144:This rule provides for raising capital through privateplacement of ADRs with large institutional investorscalled qualified institutional bodies (QIB’s). Suchissues operate at Level 1 status and do not requirefulfillment of GAAP standards.

Regulation ‘S’:Regulation ‘S’ provides for raising capital through theplacement of ADR’s to offshore non-US investors.Section ‘S’ of the SEC regulation permits ADR’s to beissued to individuals and corporate entities withoutany restrictions outside the US


B4 B4

a

B4 b

9.7 Comparison Between Different Levels of ADR


PARTICULARS Level 1 Level 2 Level 3

Trading Pattern Only on OTC market Listing allowed on stock exchanges in the US

Listing allowed on stock exchanges in the US

Registration with SEC

ADR’s are registered but underlying shares are not registered.

Both ADRs and underlying shares registered

Both ADRs and underlying shares registered

9.7 Comparison Between Different Levels of ADR- contd.


PARTICULARS Level 1 Level 2 Level 3

Adherence to GAAP norms

Only nominal fulfillment

Partial compliances

Full compliance

Disclosure norms

Limited Stringent Very stringent

Capital raising No public issue. Only private placement

Public issue without fresh capital.

Public issue with fresh capital.

9.8 Advantages of ADRs and GDRs

i. Provides access to the more liquid markets.ii. Provides funds at lower costs and better terms.iii. It expands the investor base for the issuing

company.iv. Establishes name recognition for the company in

new capital markets.v. Provides marketing advantages due to improved

brand image.vi. Source for foreign currency resources for overseas

acquisitions, joint ventures, import financing,project funding, etc.


ADVANTAGES TO THE ISSUING COMPANIES

9.8 Advantages of ADRs and GDRs

i. Access to the best investment possibilities acrossthe world.

ii. It is an easy and cost effective way for individualsto hold and own shares in a foreign company.

iii. The mechanism helps investors to avoid foreignprocedural hurdles and clearances.

iv. Means of wealth protection and investmentdiversification.

v. Hedge against adverse development in domesticeconomy.


ADVANTAGES TO THE INVESTORS

9.9 Distinction Between GDR & ADR


No Global Depository Receipts American Depository Receipts

1 Can be denominated in any freely convertible currency.

Can be denominated only in US dollars.

2 Can be issued to investors in one or more markets simultaneously.

Can be issued only to investors resident in the US.

3 Depository bank can be any international investment bank

Depository bank needs to be located in the US

9.9 Distinction Between GDR & ADR


No Global Depository Receipts American Depository Receipts

4 Issue does not require foreign regulatory clearances

Issues require approval from the Securities and Exchange Commission(SEC) of the US

5 There is no sub-classification in this instrument.

They are sub-classified in terms of the level of clearance of the SEC

6 GDRs are normally co-related to equity shares of the issuing company expressed in whole numbers.

In many cases ADR’s are co-related to equity shares of the company expressed as a fraction.

9.10 Indian Depository Receipt (IDR)

IDR’s are financial instruments that allow foreigncompanies to mobilize funds from Indian markets byoffering entitlement to foreign equity and getting listedon Indian Stock Exchange.

This instrument is similar to the GDR and ADR. IDRsneed to be registered with SEBI.

The Government opened this avenue for the foreigncompanies to raise funds from the country, as a steptowards globalizing the Indian capital market and toprovide local investors exposure in global companies.


9.11 Foreign Currency Convertible Bonds (FCCB)

FCCB is a type of Eurobond which can be exchangedfor equity shares at some later date after the issue ofthe Bond.

Features:i. It is a type of convertible bond issued in currency

different than the issuer’s domestic currency.

ii. A convertible bond is a mix between a debt andequity instrument as these bonds provide thebondholder the option to convert the bond intostock.


9.11 Foreign Currency Convertible Bonds (FCCB)iii. Investors have option to convert them into GDR’s or

underlying shares. If investors prefer to hold thebonds till the maturity date, the corporate has toredeem them on that date.

iv. The coupon rate on the FCCB would be nominal.v. FCCBs are denominated typically at thousand USD

each.vi. FCCBs can be converted at predetermined

conversion price, at any time by the investor intoGDRs or underlying shares.

vii. In India, FCCBs with up to three year tenure cost150 bps over six months LIBOR and 250 bps for 3 –5 years tenure.



Advantages:i. The company gains higher leverage, as debt is

reduced and equity capital enhanced uponconversion.

ii. FCCB does not dilute ownership immediately asholders of ADR / GDR do not have voting rights.

iii. Conversion premium adds to the capital reserves.

iv. FCCB carries fewer covenants as compared tosyndicated loan or debenture, hence moreconvenient to raise funds for Mergers andAcquisitions.



Disadvantages:i. In a falling stock market there is no demand for

FCCB.

ii. FCCB, when converted into equity brings downearnings per share, and eventually dilutesownership.

iii. In the long run, equity is costlier than debt, andhence, when interest rates are falling, FCCBs arenot preferred.

iv. Book value of converted shares depends on theprevailing exchange rates.


9.12 Foreign Currency Exchangeable Bonds (FCEB)

FCEB is a type of Eurobond (issued by issuingcompany) which can be exchanged for equity shares ofanother company (called the offered company) atsome later date after the issue of the bond.

Features:

i. FCEB is a bond expressed in foreign currency, theprincipal and interest in respect of which arepayable in foreign currency.

ii. It is issued by an issuing Company and subscribedby a person who is resident outside India in foreigncurrency.



Features: contd.

iii. The issuing company has to be a part of thepromoter group.

iv. Prior approval of Foreign Investment PromotionBoard, wherever required under the Foreign DirectInvestment policy, should be obtained.

Advantages:

i. It provides an additional avenue for Indiancompanies raising funds from overseas.



Advantages: contd.

ii. It helps companies unlock the value of theirholdings in other companies.

iii. It helps companies raise financing without furtherdilution of ownership.

Disadvantages:i. It is permissible only in certain areas and to the

extent that FCEB’s and FCCB’s are permitted.ii. Proceeds of FCEB’s cannot be used for investment

in real estate sector / in capital markets.


9.13 Distinction Between FCCB and FCEB


Particulars FCCB FCEB

Conversion FCCBs are issued by a company to non-residents providing them the option to convert them into shares of the same company at a pre-determined price.

FCEBs are issued by a company which are exchangeable for the shares of the specified group company at a pre-determined price.

Issuing Company

A proper Indian firm issues FCCBs .

FCEBs are issued by investment or holding company of group to non-residents

9.13 Distinction Between FCCB and FCEB


Particulars FCCB FCEB

Issue of fresh shares / existing shares

In an FCCB, when the holder exercises the option to convert, the issuer company will issue fresh shares to the holder in exchange for the bonds.

In case of FCEB, when the option is exercised, there is no issuance of fresh shares.

Default risk FCCB possesses low risk FCEB possesses high risk

9.14 Distinction Between FDI & FPI


Foreign Direct Investment (FDI) Foreign Portfolio Investment (FPI)

FDI can be defined asinvestment made by Non-Resident investors in theequity shares of a domesticcompany with the intention ofparticipating in themanagement of the company.

FPI can be defined as investmentby Non-Resident investors in theequity of a domestic companywith the intention of getting quickcapital gains.

FDI normally involves a longterm association between theinvestors and the targetcompany.

FPI normally involves a shortterm investment in the targetcompany




FDI normally takes placethrough a direct transactionbetween existing promotersand the investors by privateplacements.

FPI does not involve anyinteraction between the investorand the target company and suchinvestments are made throughthe stock exchange.

FDI is usually a primary markettransaction

FPI is usually a secondary markettransaction

FDI has an impact on thebalance sheet of the companythrough introduction of freshcapital, technology etc.

FPI has no such direct impactsince secondary markettransaction involves exchangeamong investors.




FDI normally involvesintroduction of new technology,financing arrangement, etc. asthe new investor activelyparticipates in managementprocess.

FPI does not involve any directlinkage between the new investorand the management. Investorsdo not wish to take part inmanagement.

FDI leads to economic growthsince it increases employment.

FPI does not create anyeconomic growth.




FDI is normally desired by allGovernments as a catalyst foreconomic growth.

Due to the problem of HOTMONEY associated with FPI, mostGovernments impose restrictionson such investments.

FDI involves investment inphysical assets.

FPI involves investment infinancial assets.

9.15 Hot Money

FDI provides the host country with foreign currencyresources which are in most cases permanentwhereas FPI provides short term foreign currencyresources helping to reduce the use of existingreserves for meeting BOP deficits.

FPI contributors include a diversified set of investorswith different risk profiles and investment horizons.

Macroeconomic fundamentals do not play a criticalrole in such investments. The intention is to makequick profits out of opportunities provided by emergingmarkets.


9.15 Hot Money

Movements of such funds distort the exchange ratesand disrupt the capital market both when entering andexiting a market

These monetary flows are called ‘Hot Money’.

Operations of domestic entities gets adverselyaffected, therefore, to safeguard against the ill effectof such fund movements, most governments introduceexchange control regulations.


9.16 Participatory Notes

In India, generally stated, investments by non-residents under the Portfolio Investment Scheme arepermitted only as foreign institutional investments.

For purpose of eligibility for investment under thisroute, a non-resident has to register with the SEBI as aForeign Institutional Investor (FII) or as a sub-accountof an existing FII.

Registration as an FII requires fulfillment of variousconditions as prescribed by SEBI.



FIIs buy shareson behalf of suchInvestors.

FIIs issue them a contract paper called as Participatory Note


BSEFII registered in India

Investors abroad

give money to

FII. Investors

not registered in India


Further, SEBI requires that any sub-account can beregistered under an FII only if that FII is the investmentmanager for such sub-account.Indian stocks, like those of other emerging marketeconomies, are in great demand by overseasinvestors.Some of these investors do not want to registerthemselves with SEBI or due to conditions prescribedfor FII registration, are unable to register themselves.It is in this context that the practice of FIIs issuingParticipatory Notes, equity Linked Notes etc. to suchoverseas investors has become prevalent recently.



Thus Participatory Notes (PN or P-Notes) areinstruments used by foreign funds, not registered inthe country, for trading in domestic market.

Participatory notes are like contract notes and areissued by foreign institutional investors, registered inthe country, to their overseas clients who may not beeligible to invest in the Indian stock markets.

FIIs invest funds on behalf of such investors, whoprefer to avoid making various disclosures required bythe regulators.


9.17 Fungibility

Fungibility means an asset can be interchanged intoanother asset of the same class. Such transactionsprovide for equalization of prices in different markets.

In the case of Depository Receipts, Fungibility providesfor their conversion into underlying shares.

It provides investors with two exit options as they can:-i) sell DRs on the international stock exchanges orii) cancel DR and sell underlying shares on the

domestic stock exchanges depending on pricebenefit.


9.17 Fungibility

On February 13, 2002 the Reserve Bank of Indiaissued guidelines permitting “Dual Fungibility”This means Depository Receipts converted intolocal shares could be re-issued by repurchasing theunderlying shares in the local market.Thus, the underlying shares representing the re-issuable Depository Receipts are called‘Headroom’.Dual or Two-way Fungibility, therefore, represents aform of capital account convertibility.


9.18 Foreign Direct Investment in India

FDI is a matter of special interest in developingcountries because such countries are continuously incompetition to attract foreign capital for enhancingavailability of investible funds in their economies asalso to acquire new technology and managerial skills.

This competitive environment results in developingcountries providing several financial incentives suchas tax concessions, liberal regulations andconcessions for repatriation of profits.


9.18 Foreign Direct Investment in India

However, FDI also has adverse side effects due to whichgovernments of developing countries need to control thequantity of such inflows, their end utilization and theinvestment agreements between the contracting parties.

Despite very liberal and transparent FDI mechanism andsound macroeconomic fundamentals, India has notbeen able to achieve the expected level of FDI inflows.

This is due to the slow process of policy and regulatorychanges. Economic reforms were introduced in India in1991 with Liberalization, Privatization and Globalization(LPG) model.


9.19 Factors Contributing to the Slow Flow of FDI into India

Despite attractiveness of the Indian market in terms ofsize, demographics of the population, the liberalizedterms for inward FDI etc., the record of the country inthis regard has been poor. The factors that contributedto this poor performance are:-

1. India has a highly regulated business environmentin terms of controls and procedures.

2. The government enjoys a monopoly in several keysectors of the economy.

3. There are limitations on acquisition of real estate.


9.19 Factors Contributing to the Slow Flow of FDI into India

4. The labor laws require reframing in an environmentof market economies.

5. The infrastructure, especially in terms of

transportation is inadequate.

6. The modern communication systems available in

urban India need to percolate to rural areas.7. The fiscal deficit arising out of government

borrowing is too large resulting in very high debt.


9.20 Foreign Investment Promotion Board (FIPB)

1. The FIPB mechanism was specially designed to

permit FDI proposals not falling under the

automatic route.

2. There are no specific pre-established parameters

for deciding on such proposals.

3. Each proposal is considered on merit, based on

potential for economic benefit to the country.“International Equity Market”

9.20 Foreign Investment Promotion Board (FIPB)

4. Each proposal is considered in totality and the

outcome is advised within 30 days of submission.

5. The recipient company , however, needs to intimate

to the concerned regional Office of RBI regarding

the receipt of investment amount within 30 days of

receipt and file the necessary documents 30 days

of issuing equity to foreign entity


9.21 Foreign Investment Promotion Council (FIPC)

1. Despite efforts and progressive liberalization of

investment norms in terms of quantitative ceilings

for various sectors and the conditions / terms of

investment, the country has failed to attract the

expected level of FDI.

2. The Government, therefore, constituted the Foreign

Investment Promotion Council to promote and

market India as an investment destination.“International Equity Market”

9.21 Foreign Investment Promotion Council (FIPC)

3. The FIPC is expected to play a proactive role inidentifying both domestic entities which canbenefit from FDI and the foreign counterparts andcountries which can be tapped for suchpartnerships.

4. While the FIPB only comes into the picture whenthere is an actual proposal for evaluation, the FIPCwould actively pursue generation of such proposal.

5. The FIPC is set up under the Industry Ministry toensure greater co-ordination of efforts towardsdesired objective.


9.22 Summary

The international financing decision has severaldimensions which must be weighed against each otherbefore choosing a particular mode of funding. The all-incost of funding and the various risks remain the guidingprinciples but regulatory issue and accessibility oftentakes precedence over cost and risk considerations. Sincethe start of 1990s, equity financing on global marketsbecame accessible to firms in developing countries.Portfolio investments by foreign investors in the stockmarkets of developing countries and the depositoryreceipts mechanism have been the dominant form ofequity financing by firms in emerging markets.


9.22 Self Assessment Questions

1. Explain the mechanism of a GDR issue.

2. What is ADR and explain different types.

3. Distinguish between FDI and FPI.

4. Bring out the concept of Petrodollars and Hot

Money.

5. Discuss the concept of participatory Notes in the

Indian context.


WITH THIS WE COMPLETE THE CHAPTER 09 –“International Equity Market”

NEXT LET US MOVE OVER TO CHAPTER 10

“RISK MANAGEMENT & DERIVATIVES”

Chapter 09

Documents

Transcript of Chapter 09