International Equity Market
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International Equity Market

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International Equity Market International Equity Market Presentation Transcript

  • The International Banking & Money Market PART II
  • The International Euro-Equity Market
  • Mobilizing Equity Flows
    • For mobilising equity investments, the companies
    • can approach:
          • Domestic markets
          • 2. Foreign stock exchanges
  • 340 925 Johannesburg JSE Limited South Africa 18 408 949 Moscow MICEX Russia 17 1,607 1,091 Seoul Korea Exchange South Korea 16 1,360 1,171 Madrid BME Spanish Exchanges Spain 15 788 1,229 Zurich SIX Swiss Exchange Switzerland 14 3,572 1,311 Shenzen Shenzen Stock Exchange China 13 1,628 1,429 Frankfurt Deutsche Borse Germany 12 1,062 1,454 Sydney Australian Securities Exchange Australia 11 868 1,545 Sao Paulo BM&F Bovespa Brazil 10 801 1,596 Mumbai National Stock Exchange of India India 9 258 1,631 Mumbai Bombay Stock Exchange India 8 1,368 2,170 Toronto Toronto Stock Exchange Canada 7 1,496 2,711 Hong Kong Hong Kong Stock Exchange Hong Kong 6 4,496 2,717 Shanghai Shanghai Stock Exchange China 5 2,741 3,613 London London Stock Exchange United Kingdom 4 3,787 3,827 Tokyo Tokyo Stock Exchange Japan 3 13439 4931 New York NASDAQ OMX USA/ Europe 2 19813 15970 New York NYSE Euronext USA/ Europe 1 (USD Billions) (USD Billions)         Trade Value Market Capitalisation Location Stock Exchange Economy Rank MAJOR STOCK EXCHANGES ( 31.12.2010)
  • Mobilizing Equity Flows – Cross Listing
    • Cross-listing refers to a firm having its equity shares listed on one or more foreign exchanges, in addition to the home country stock exchange
    • MNCs often cross-list their shares, but non- MNCs also cross-list
  • Foreign Investors
    • Foreign investors enter an equity market with
    • basic risk return trade off in their minds
    • While entering a nation, the FIIs undertake a
    • country study in which various economic
    • indicators are tracked and analysed…..
  • Foreign Investors
    • 1. The growth rate of the economy
    • 2. Debt/ GDP ratio
    • 3. Foreign reserve position
    • 4. Debt service ratio
    • 5. Transparency of institutional practices
    • 6. Political risk
  • Mobilizing Equity Flows
    • In developed equity markets, accounting
    • standards and disclosure norms are stringent
    • Therefore, it is usually difficult to list equity
    • on these exchanges
    • To avoid this, depository receipts can be
    • issued and funds mobilised
  • ADRs & GDRs
    • In American markets, there are two important
    • instruments with the help of which the funds can
    • be mobilised:
    • 1. American Depository Receipts (ADRs)
    • 2. Global Depository Receipts (GDRs)
    • ADRs have less stricter norms than GDRs
  • GDRs
    • GDR represents a certain number of
    • underlying equity shares
    • ( e.g. Reliance 1 GDR = 2 equity shares)
    • The shares are issued by the company to the
    • intermediary called the depository, in whose
    • name the shares are registered
    • It is the depository which subsequently issues
    • the GDRs
  • GDRs
    • The physical possession of the equity shares is
    • with custodian
    • GDRs do not figure in the books of accounts of
    • the company
    • Though the GDRs are quoted in dollars, the
    • underlying is in rupees
  • GDRs
    • The dividend outflow is in rupees. The
    • depository converts it in US dollars and pays
    • to the investors after deducting tax
    • GDRs can be cancelled and exchanged against
    • share certificates
  • Uses of GDR for Corporate Financing
    • To raise debt or equity capital
    • To diversify shareholder base
    • To increase demand for their securities
    • To create dollar denominated securities for
    • tax efficient acquisitions
    • To enhance global image
    • The company does not assume any foreign
    • exchange risk
  • Benefits to the Investors
    • GDRs are quoted in dollars, dividend and
    • interest are also in dollars
    • GDRs overcome foreign investment
    • restrictions
    • GDRs overcome obstacles that institutional
    • investors have in purchasing and holding
    • securities outside the domestic markets
  • GDRs
    • Prices of GDRs are often close to values of
    • related shares, but they are traded & settled
    • independently of the underlying share
    • Several international banks issue GDRs, such as
    • JP Morgan Chase, Citigroup, Deutsche Bank,
    • Bank of New York
  • GDRs
    • GDRs are often listed in the Luxembourg Stock
    • Exchange and in the London Stock Exchange,
    • where they are traded on the International
    • Order Book (IOB)
    • Normally 1 GDR = 10 Shares, but not always
  • GDR Prices as on 03.09.2010 1 USD = Rs. 46.6700 738.37 14.15 369.95 31/10/1996 2,768.23 118.63 SBI (GDR) 240.42 11.75 300.00 28/02/1994 933.40 40.00 RIL (GDR) -43.34 19.38 100.00 30/06/1994 512.44 10.98 Ranbaxy (GDR) 206.50 4.46 74.75 30/11/1993 637.98 13.67 M and M (GDR) 159.60 15.35 150.00 31/03/1996 929.90 39.85 L and T (GDR) to Issue Price (%) (USD) (USD millions)   (Rs.) (US $)   Prem / Discount Issue Price Issue Size Issue Date Equiv Value GDR Price Security Name
  • American Depositary Receipts (ADRs)
    • ADR represents ownership in the shares of a
    • non-U.S. company and trades in U.S. financial
    • markets
    • The stock of many non-US companies trade on
    • US stock exchanges through the use of ADRs
  • American Depositary Receipt (ADRs)
    • ADRs enable U.S. investors to buy shares in
    • foreign companies without the hazards or
    • inconveniences of cross-border & cross-
    • currency transactions
    • ADRs carry prices in US dollars, pay dividends
    • in US dollars, and can be traded like the shares
    • of US-based companies
  • ADR Prices as on 03.09.2010 1 USD = Rs. 46.6700 647.78 3/9/2010 13.88 Sterlite (ADR) 73.27 3/9/2010 1.57 SIFY (ADR) 235.22 3/9/2010 5.04 Satyam (ADR) 137.68 3/9/2010 2.95 Rediff (ADR) 914.73 3/9/2010 19.60 Patni (ADR) 127.88 3/9/2010 2.74 MTNL(ADR) 2,831.00 3/9/2010 60.66 INFY(ADR) 2,021.28 3/9/2010 43.31 ICICIBk. (ADR) 7,914.30 3/9/2010 169.58 HDFCBank (ADR) 1,426.24 3/9/2010 30.56 Dr.Reddy (ADR) Equiv Value (Rs.) ADR Price Date ADR Price (US $) Security Name
  • Indian Equity & Foreign Equity Market
    • In Sept. 1992, the Indian government
    • announced the opening of Indian stock
    • markets for approved foreign institutional
    • investors (FIIs)
    • FIIs were allowed to buy 24% of equity in
    • Indian companies
    • The eligible foreign investors include
    • pension funds, mutual funds etc.
  • Indian Depository Receipts (IDRs)
    • A foreign company can access Indian securities
    • market for raising funds through issue of IDRs
    • An IDR is an instrument denominated in Indian
    • Rupees in the form of a depository receipt
    • created by a Domestic Depository against the
    • underlying equity of issuing company
  • Indian Depository Receipts (IDRs)
    • Just like overseas investors in the US-listed American Depository Receipts (ADRs) of Infosys and Wipro get receipts against ownership of shares held by an Indian custodian, an IDR is proof of ownership of foreign company’s shares
    • The IDRs are denominated in Indian currency
  • Indian Depository Receipts (IDRs)
    • IDRs will be issued to Indian residents in the
    • same way as domestic shares are issued
    • Investors eligible to participate in an IDR issue
    • are institutional investors, including FIIs — but
    • excluding insurance companies and venture
    • capital funds — retail investors and non-
    • Institutional Investors
    • NRIs can also participate in the Issue
  • Indian Depository Receipts (IDRs)
    • Indian individual investors have restrictions on holding shares in foreign companies, but IDR gives Indian residents a chance to invest in a listed foreign entity
    • No resident individual can hold more than $200,000 worth of foreign securities, including shares, as per foreign exchange regulations. However, this will not be applicable for IDR
  • Indian Depository Receipts (IDRs)
    • Standard Chartered PLC, a UK based multinational bank has become the first global company to file for an issue of Indian Depository Receipts in India
    • The company’s issue for 24 crore IDRs opened on may 25, 2010 and sought to raise between Rs. 2400 to Rs. 2700 Crore.
    • The issue was subscribed 2.20 times on an overall basis
  • Indian Depository Receipts (IDRs)
    • 10 IDRs represent one share of US $ 0.50 nominal value
    • Standard Chartered Bank, Mumbai is the domestic depository, and it appointed Bank of New York, Mellon as its overseas depository
    • Thank you