This Presentations basically have a brief overview of the foreign stock markets which is a part of international financial markets in which I have assumed US as domestic country and rest of the remaining countries as foreign country or abroad.

1. INERTNATIONAL STOCK
MARKETS

2. INTRODUCTION
• The stock market refers to the collection of markets and exchanges where the issuing and trading of equities
(stocks of publicly held companies), bonds and other sorts of securities takes place, either through formal
exchanges or over-the-counter markets. Also known as the equity market, the stock market is one of the most
vital components of a free-market economy, as it provides companies with access to capital in exchange for
giving investors a slice of ownership.
• This market allows companies to raise a larger amount of capital than a single market and investors to hold
stocks in a number of different countries simultaneously. Learn more in: international portfolio diversification
benefits among developed and emerging markets within the context of the recent global financial crisis.

3. Issuance of stock in foreign markets
• MNCs and Domestic Firms commonly obtain Long Term Financing By issuing
Stock Locally so, Mncs can attract funds From foreign Investors by issuing stock
in international Markets.
• Stock Offering can be well digested when it is issued in several markets.
• It enhances the firms image and name recognition in foreign Markets.
• Locations of an MNCs can influence the decision about where to place its stock.
• MNCs need to have their stock listed on an exchange in any country
• Common Currency(euro) has resulted in more stock offerings in Europe by U.S.
and European-based MNCs.

4. Issuance of foreign stock in united states
• Non U.S. corporations issue stock in the united states to raise the large amount
of funds and these are called Yankee stock offerings due to liquidity of its new
issues market.
• It enables the non-us firms to diversifies its shareholder base as it is limited in
its own domestic market.
• U.S. investment banks commonly serves as underwriters of the stock targeted
for the u.s. market.
• Firms that issue stock in the United States are required to satisfy the stringent
disclosure rules and thus, they will be exempted from some of the rules when
they qualify for a securities and exchange commission guideline (Rule 144a).

5. American depository receipts
• Non US firms can also obtain equity financing by using American Depository
Receipts which are certificates representing bundles of stock.
• Its use can circumvents some disclosure requirements imposed on stock
offerings in the united states.
• These can be traded like just like shares of stock, also its prices is responsive to
demand and supply conditions.
• Formula for calculating Price of an ADR is
P(ADR)= P(FS) X S
Where, P(ADR)=price of the ADR
P(FS) =Price of Foreign Stock measured in foreign currency ; S= Spot Rate
of foreign currency

6. ADR……
• The ADR market grew after businesses were privatized in the early 1990s since
then some of these business issued adrs to obtain financing.
• Examples of adrs are Cemex (cx, based in Mexico) ,china telecom corp. (CHA,
china) ,nokia (nok, Finland) and credit Suisse group (CS, Switzerland).
• In the above formula if there is a discrepancy between the adr price and the
price of the foreign stock, investors can use arbitrage to capitalize on the
discrepancy between the prices of the two assets.
• Since transaction costs are involved in converting adrs to foreign shares, from
this arbitrage will occur only if the potential arbitrage profit exceeds the
transaction costs.

7. Effect of Sarbanes- Oxley act on foreign
stock listings
• In 2002, this act has been passed by the US congress.
• It requires the firms to provide more complete financial disclosure.
• This act was the result of financial scandals involving us based mncs such as
Enron and WorldCom.
• This act was intended to ensure that financial reporting was more accurate and
complete but its costs more than $1 million and thus it made lot of non us firms
to place new issues of stock in UK instead of us so they don’t have to comply
with the law.

8. Investing in foreign stock markets
• Investors generally considered various factors while Purchasing stocks outside
the home country which are mainly:
1) Economics conditions of a country –World Economic Situation prospects,2018.
2) Expectation on Strengthening of currency to get big time returns.
3) Diversification benefit to reduce the impact of possible adverse stock market
conditions in their country.

9. Euronext market
• A cross-border European stock exchange, originally created in 2000 from the merger of the Amsterdam,
brussels and Paris stock exchanges.
• In 2001 and 2002, respectively, Euronext acquired the London international financial futures and options
exchange (life) and the Portuguese stock exchange, bolas de Valore's de Lisbon e Porto (bvlp), in order to
become one of the world's largest exchanges.
• On April 4, 2007, Euronext completed their agreed merger with the nyse group, resulting in the formation of
nyse Euronext.
• It serves as a single European stock market which would make easier for those investors who prefer to do all
of their trading in one market.

10. Stock Market characteristics
• Market characteristics such as amount of trading relative to market
capitalization and the applicable tax rates can vary substantially vary among the
emerging markets (new markets).
• Stock market participation and trading activity are higher in countries where
mangers are encouraged to make decisions that serve shareholders interests.
• Accordingly, if investors believe that the money they invest in firms will not be
used to serve their interests or that the firms do not provide transparent
reporting of their conditions or operations, they will not probably not invest in
that country's stocks.
• Lastly, an active stock market requires the trust of the local investors and thus it
leads to more participation and trading.

11. Impact of governance on stock market
participation and trading activity
Greater investor Participation
and trading activity
Managerial Decisions are
Intended to Serve
Shareholders
Shareholder
voting power
Strong
Shareholder
Rights
Greater transparency
of corporate financial
conditions
Low level of
corporate
Corruption
High Level
of Financial
Disclosure

12. MADE BY: PURNIMA MEENA,DSE