Intl .Finance1
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Transcript of Intl .Finance1
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Innovative Products in InternationalMarket
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Gaurav Bhattar
From
Rajasthan
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Jignesh Nayak
FromGujarat
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Sudipto Roy
FromWest Bengal
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Krushna Mantri
FromMadhya Pradesh
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Kirti Dalvi
FromMaharashtra
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All of us came togetherfor Prof. N .K. Gupta
Presentation
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Innovative Products
y Weather Derivatives
y Terror Futures
y Volatility Index
y REITS
y FIDEMAccount
y Equity Insurance
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Introduction to Weather Derivatives
Weather derivatives are financialinstruments that can be used by organizations orindividuals as part of a risk management strategy to
reduce risk associated with adverse or unexpectedweather conditions. The difference fromother derivatives is that the underlying asset(rain/temperature/snow) has no direct value to price
the weather derivative.
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Weather Derivatives
y Farmers can Hedge when they have poor crops
y Insure crops against rainy weekends in summers
y Gas and Power companies use HDD and CDD
y Sport event managing company can hedge
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Innovative Products
y Weather Derivatives
y Terror Futures
y Volatility Index
y REITS
y FIDEMAccount
y Equity Insurance
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Real estate Investment trust
ORI GI N DATE BACK TO THE 1880S
A TAX DESIG NATION FOR A CORPOR ATION
REQUI RED TO DI STRI BUTE 90% OF THEI R
I NCOME
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Types of REITs
y EquityREITs
y Mortgage REITs
y Hybrid REITs
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ASIAPACIFIC TRANSACTION BY VOLUMEAND SECTOR
OFFICE , 31%
RETAIL, 22%INDUSTRIAL, 10%
MIXED, 11%
RESIDENTIAL, 13%
OTEL, 3% OT
ERS, 10%
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COUNTRY OFFI
CE
INDUST
RIAL
RETA
IL
DIVERSI
FIED
SPECIALI
ZED
HOTE
LS
HEALTH
CARE
RESIDEN
TIAL
UNITED STATES 17 7 25 7 13 8 6 17
UNITED
KINGDOM
18 5 74 1 2 0 0 0
SINGAPORE 16 19 55 0 6 0 0 4
JAPAN 64 2 14 3 0 1 0 16
HONG KONG 29 54 0 5 12 0 0 0
AUSTRALIA 22 16 54 5 2 1 0 0
NEW ZEALAND 46 15 27 3 9 0 0 0
CANADA 13 14 41 0 11 0 5 16
SOUTH KOREA 67 0 0 33 0 0 0 0
COUNTRY WISE PROPERTYSPLIT (%)
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No. Of REITs
Countries Dec-09 Jun-08 Jun-07 Jun-06
America 142 148 169 253
United Kingdom 20 19 14 N/A
Hong Kong 7 7 7 4
Singapore 20 20 16 11
Japan 41 42 41 38
Germany 4 2 N/A N/A
Australia 57 64 58 58
New Zealand 8 8 10 6
Canada 30 33 26 33
South Korea 3 6 6 11
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Innovative Products
y Weather Derivatives
y Terror Futures
y Volatility Index
y REITS
y FIDEMAccount
y Equity Insurance
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y 24 Hour market
y
Highly robust
y Avg. daily turnover USD 3 trillion per day
y High currency volatility
y Fine pricing/Super-fast quotes
Forex Market
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y 9 to 5 market
y Limited market makers
y Avg. daily turnover USD 48 billion
- Merchant 13 bln
- Interbank 35 bln
y RBI close overview
Indian Forex Market
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y ADR
y GDR
y FCCB
y FCEB
y ECB
Instruments
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y Introduced to the financial markets in 1927y Are bought and sold on American markets just like
regular stocksy Each ADR Represents Some Number OfShares OfUnderlying Stock
y E.g. Infosys Issued 2 ADRs For Each Share In IndianStock Market
y Level 1 - Most Basic TypeLevel 2 - Slightly more requirements than Level1Level 3 Most Prestigious
AMERICAN DEPOSITORY RECEIPTSAMERICAN DEPOSITORY RECEIPTS
(ADRS)(ADRS)
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y Deposit Agreement
y Lesser Reporting Requirements As Compared ToSecurities Exchange Commission Of USA
y Used as Currency for Mergers and Acquisitionsy Institutional Investors can Buy
y Payment of Dividends in the GDR Currency
y T+3 settlement
y More than 900 GDRs listed on exchangesworldwide, with more than 2,100 issuers from
80 countries.
GLOBAL DEPOSITORY RECEIPTS (GDRS)GLOBAL DEPOSITORY RECEIPTS (GDRS)
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y Debt instruments - convertible into equity of the company
y Both FDI and ECB policies are applicable
y
Coupon rate must not exceed 300 basis points over SBI PLR
y RBI approval
y Restriction on use of proceeds
y Proceeds to be parked abroad till required in India
y Preferred by companies for raising funds for overseas expansionsand acquisitions
Foreign Currency Convertible Bonds
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FCEB Scheme was notified on February 15, 2008
A security offered by an issuing company and subscribed to
by investors living outside India and exchangeable intoequity shares of another company, which is called theoffered company.
Issuing Company must - Part of the promoter group &hold
the equity shares
Offered Company - Listed company
Foreign Currency
Exchangeable Bonds
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y Permitted by the Govt. as an additional source of fundsto Indian Corporate
y
Borrower can access ECB under two routes, namelythe automatic route and the approval route
y Under the automatic route up to US $ 500 million in afinancial year
y Under the Approval route above US $ 500 million in afinancial year
External Commercial
Borrowings