International Business Finance

Emerging Trends in International Capital Markets

Three interrelated developments in global capital markets are:

  1. The sustained rise in gross capital flows relative to net flows;
  2. The increasing importance of securitized forms of capital flows; and
  3. The growing concentration of financial institutions and financial markets.

Taken together these trends may signal what some others have  referred to as a ‘quiet opening’ of the capital account of the balance of  payments, which is resulting in the development, strengthening and growing  integration of domestic financial systems within the international financial  system. Finance is being rationalized across national borders, resulting in a  breakdown in many countries in the distinction between onshore and offshore  finance.… Read the rest

Abey Francis

Emerging Markets for International Capital Investments

Of late emerging markets have become a buzzword among the  international investors for reaping greatest potential rewards which would be  impossible if they stayed put in their affluent hinterlands. The term emerging  markets (EMs) is a collective reference to the stock markets of the developing  nations.  A question, which overpowers a discerning mind, is why the  international investors are looking towards emerging markets for investing  their funds instead of established markets like US? Three reasons can be  given to answer this question.

First, the average total return of emerging  markets  has outstripped those of  developed markets. Investments total return index computed by the IFC (International Finance Corporation)  which  measures the total return for each country based on those stock available to  foreign investors shows that return on investment in IFC composite of EMs is  61.64 per cent higher than the return on investment in US market over the  years.… Read the rest

Abey Francis

Centralized Cash Management Operations of Multinational Corporations

International money managers attempt to attain on a worldwide basis the traditional  domestic objectives of cash management: (1) bringing the company’s cash resources  within control as quickly and efficiently as possible and (2) achieving the optimum  conservation and utilization of these funds.

Accomplishing the first goal requires establishing accurate, timely forecasting and  reporting systems, improving cash collections and disbursements, and decreasing the  cost of moving funds among affiliates. The second objective is achieved by  minimizing the required level of cash balances, making money available when and  where it is needed, and increasing the risk-adjusted return on those funds that can be  invested.… Read the rest

Abey Francis

Definition of Forfaiting

Forfaiting is a specialized form of trade finance that allows the exporter to offer  extended credit to the importer. Under forfaiting  , the importer gives the  exporter a bundle of bills of exchange or promissory notes covering the principal  amount as well as the interest. Each tranche of the notes fall due at different points of  time in the future, e.g. every six months, extending up to several years. The notes are  backed by an aval or guarantee provided by a reputed bank in the importer’s country.  The exporter can then discount these notes without recourse with banks who  specialize in the forfaiting business to generate an immediate cash flow.… Read the rest

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Buyers Credit and Suppliers Credit

Buyer’s Credit

Buyer’s Credits are a form of Eurocurrency loans designed to finance a  specific transaction involving import of goods and services. Under this arrangement,  lending bank(s) pay the exporter on presentation of shipping documents. The  importer works out a deferred payment arrangement with the lending bank, which the  bank treats as a loan. Large loans are club loans or syndicated loans. Many  provisions in the loan agreement are quite similar to a general purpose syndicated  credit. However, a number of formalities have to be completed before the exporter  can draw funds. The interest rate of the loan is linked to a market index such as  LIBOR.… Read the rest

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Double Taxation Relief

One of the major risk in the International Business is the payment of taxes in both the  countries i.e. the country in which the business is actually effected and in the  country where the MNC is having its head office. This type of double taxation  will definitely impede the growth and development of the MNCs in multiple  ways. So the provisions are made to avoid the double taxation (Double Taxation Relief) between the two  countries through two types of relief namely Bilateral Relief and Unilateral  Relief.

Bilateral Relief

Under this scheme, relief against the burden of double taxation is worked out on  the basis of mutual agreement between two countries.… Read the rest

Abey Francis