Funding Avenues In Global Capital Markets
Global financial markets are a relatively recent phenomenon. Prior to 1980, national markets were largely isolated from each other and financial intermediaries in each country operated principally in that country. The foreign exchange market and the Eurocurrency and Eurobond markets based in London were the only markets that were truly global in their operations. Financial markets everywhere serve to facilitate transfer of resources from surplus units (savers) to deficit units (borrowers), the former attempting to maximize the return on their savings and the latter looking to minimize their borrowing costs. An efficient financial market thus achieves an optimal allocation of surplus funds between alternative uses. Healthy financial markets also offer the savers a wide range of instruments enabling them to diversify their portfolios. Capital markets of the newly industrializing South East Asian economies. Even in an advanced economy like that of Germany, the structure of corporate financing is such that most of the companies rely on loans from domestic banks for investment and investors do not appear to show much interest in foreign issues. All these reservations, it can be asserted that the dominant trend is towards globalization of financial markets. There are two broad groups of borrowers, of the total debt raised on the international markets in recent years. There are fluctuations in the relative importance of different types of instruments as markets respond to changing investor / borrower needs and changes in the financial environment. It is clear that for developing countries, as far as debt finance is concerned, external bonds and syndicated credits are the two main sources of funds.
An overview of finding avenues in the global capital markets is the procedural aspects of actually tapping a market – acquiring the necessary clearances and approvals, preparing various documents, investor contact and so forth-are usually quite elaborate. Issues related to accounting, reporting and taxation are quite complex and require specialist expertise. We will keep clear of these matters and concentrate on the basic features and cost-risk characteristics of the various instruments.