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FINA 7320 SECTION 070 International Financial Markets

Fall 2015

Professor Monika Miller

Final Project

Due: Wednesday, November 4, 2015

Fahad AlHamwah

Alaa Sulaiman

Abdullah Aljohani

Jose Quasar Elizundia Salcido

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Item 1 a:

“ 09/02/2015 – 10/29/2015”

Name of firm% Change in stock

pricePurchase price $ Closing price $

Starbucks 16.37% $54.50 $63.42

Goldman Sachs 3.32% $184.87 $191.00

Yara International 7.79% $41.74 $44.99

Tata Motors Limited (ADR) 21.18% $24.41 $29.58

Table-1: Percentage change in stock price

The stock performance of Starbucks Corporation is impressive because the stock

increased by 16.37% during the time period of 2nd September 2015 to 29th October 2015. The

primary reason behind such stock performance is. “Coffee prices are suppressed and the business

has been performing well” (James Bartelloni, 2015). Also, the recent financial results of the

company are positive. The highlights of Q3 Fiscal 2015 are, “Consolidated net revenues

increased 18% over Q3 FY14 to a quarterly record $4.9 billion” (retrieved from Starbucks

newsroom). Starbucks strong Q3 fiscal results are the prime factors behind such an exceptional

stock performance. It should also be noted that the cash dividend paid by the company was

highest in 2014; hence buyers were encouraged to buy more stocks of the company.

The % change in stock price for Goldman Sachs during the time period of 2nd September

2015 to 29th October 2015 is 3.32%. The purchase price is $184.87; whereas, the closing price is

$191. The average performance of Goldman Sachs is primarily due to the decrease in net income

for Q2 of 2015 as compared to Q2 of the year 2014. The net income for Q2 of 2015 is $962

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million as compared to $1,953 million in Q2 of 2014. It should also be noted that the basic EPS

for Q2, 2015 is $2.01 as compared $4.21 of Q2, 2014. Poor performance and low basic EPS have

discouraged investors to invest their money on Goldman Sachs’ shares.

The % change in stock price for Yara International during the time period of 2nd

September 2015 to 29th October 2015 is 7.79%. The purchase price is $41.74; whereas, the

closing price is $44.99. The company has done exceedingly well in recent times. There is a

308% ($376.46 million in Q2, 2015 as compared to $92.28 million in Q1, 2015) increase income

Before Extra ordinaries & Disc Operations interest for Q2, 2015 as compared to that of Q1,

2015. Also, Earnings per Share Diluted Net has increased from $.33 per share to $1.37 per share.

Outstanding financial results for Q2, 2015 over Q1, 2015 has encouraged investors to buy more

stocks of the company.

The % change in stock price for Tata motors during the time period of 2nd September

2015 to 29th October 2015 is 21.18%. The purchase price is $24.41; whereas, the closing price is

$29.58. One of the primary reasons behind exceptional performance of Tata motors’ stock is the

recent surge in sales in the high-end vehicles. According to money control (2015), “Shares of

Tata Motors have climbed 7.5 percent intraday Thursday after decent growth in Jaguar Land

Rover (JLR) September sales”. The increase in sales of high-end models has triggered the stock

price of the company.

Item 2

SBUX VS S&P500 “09/02/2015 – 10/29/2015”

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Fig-1: Comparison between Starbucks’ stocks & US Index

The increase in Starbucks’ stock price was triggered by the growing market conditions of

the USA. It should also be noted that “The popularity of cold brew coffee in the United States

has exploded in the last year, according to new research from Mintel” (retrieved from

mintel.com, 2015). Therefore, there is a positive correlation between the growths is US economy

and the increase in the stock price of Starbucks. Therefore, the growth of Starbucks’s stock price

is due to the market conditions of USA.

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GS VS S&P500 “ “09/02/2015 – 10/29/2015”

Fig-2: Comparison between Goldman Sachs’ stocks & US Index

Goldman Sachs operates as an investment banker; therefore, the stock price of Goldman

Sachs may not be so sensitive to the market conditions. The stock performance of Goldman

Sachs may have higher impact of the global business than the US economy. According to Richa

Naidu and Olivia Oran (2015), “Goldman Sachs Group Inc's profit plunged for the second

straight quarter as bond trading revenue fell by a third amid market turmoil stemming from

concerns about global growth”. Therefore, we can state that the fluctuations in Goldman Sach’s

stock price may have stemmed from the Global financial tensions.

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Item 3a

YARO VS NOK “ 02/09/15 – 10/29/15”

Fig-3: Correlation between Yara International’s stocks & Dow Jones Norway Total Stock Market Index

The above figure shows a positive correlation between Yara International’s stock price

and Dow Jones Norway Total Stock Market Index (NOK). Yara is world’s largest supplier of

mineral fertilizers. “Yara grows knowledge to nurture life by delivering solutions for sustainable

agriculture and the environment” (retrieved from yara.com, 2015). Yara International is one of

the largest companies of Norway. The performance of Yara International’s stock is closely

associated with the market conditions of Norway.

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Tata Motors VS BSE Sensex “ “09/02/15 – 10/29/15”

Fig-4: Correlation between Tata Motors Stock & BSE SENSEX

September-October months are celebrated throughout as festival months in India. During

this time, the mood of the investors is generally upbeat. Investors prefer to buy huge number of

shares; because they believe the time is auspicious and can bring a lot of fortune for them.

Hence, the overall economy grows during this time. One of the primary reasons behind the

exceptional performance of Tata motors’ stock is the festival season in India. Therefore, the

performance of Tata Motors’ stock is positively correlated with the market conditions of the

country.

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Item 3b

Yara International VS Tata Motors “ “09/02/2015 – 10/29/2015”

Fig-5: Comparison between foreign stocks’ performance

From the above figure, it is pretty evident that both company’s stocks faced ups and

downs during the specified time period. It should be noted that both the stocks’ prices touch

lowest values during the last week of September and reached highest value during the last week

of October. During this time, Chinese economy was struggling and accordingly the global

economy faced problems due to their dependencies on Chinese companies. However, the stock

of Tata Motors performed well due to increase in sales of Tata Motors during festival season.

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Item 3c

Yara International VS S&P 500 “09/02/15 – 10/29/15”

Fig-6: Comparison between Yara International's stock and US Index (S&P 500)

The above figure shows the comparison between Yara International’s Stock performance

and the US Index. The above chart indicates relatively unstable stock price movement of Yara

International as compared to the US Index. The positive correlation found may be due to the fact

that Yara exports nutrient. Phosphorus and other fertilizer related products to the USA.

Therefore, it is obvious that there would be a positive correlation between USA index and Yara

International’s stock. The chart also indicates the impact of weak Chinese economy on both

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Yara’s stock as well as on US Index. The correlation index between Yara’s stock price

movement and US Index movement is .85. It suggests a strong correlation.

Tata Motors versus S&P 500 “09/02/15 – 10/29/15”

Fig-7: Comparison between Tata Motors' stock and US Index (S&P 500)

The above chart indicates the fluctuations of Tata Motors’ stock that moves up to 20%

from initial price during the specified time period. Whereas, the US index moves up to 7%

during the same period. The fall in stock price is due to the inefficiencies in the Asian market.

From the above figure, it can be stated that there are strong correlation between the stock price of

Tata Motors and the US Index. The correlation index between Yara’s stock price movement and

US Index movement is .94. It suggests a strong correlation between them.

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Item 4a

Starbucks Corporation

Fig-8: Comparison between USD & Japanese Yen (JPY)

According to Trefis Team (2014), “Currently, Japan is Starbucks’ second largest market

with over 1,000 restaurants”. Therefore, Starbucks is most exposed to the currency of Japan. The

correlation between USD and Japanese Yen is given in the above chart. It is evident from the

above chart that the USD has appreciated against JPY during the last week o October, 2015.

During the specified time, we can observe both the positive and negative correlation between

JPY and USD.

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Item 4b

Goldman Sachs

Fig-9: Comparison between USD & Russian Rubel

According to Goldman Sachs’ Annual report (2014), “As of December 2014, our total credit

exposure to Russia was $416 million and was substantially all with non-sovereign counterparties

or borrowers”. Therefore, Goldman Sachs is most exposed to the currency of Russia. Russia’s

currency is known as Rubel. The correlation between Rubel and USD is given in the above chart.

The above chart shows that USD appreciates with respect to Rubek during the first week of

September 2015 and depreciates with respect to Rubel during the first week of October.

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Item 5 a

Yara International

Fig-10: Comparison between USD & NOK

Yara International is a multinational firm. It is involve with several cross-border

transactions. In most of the business transactions with other countries, USD is used as the

currency as it is regarded as the global currency by most of the country. Therefore, profitability

of the company depends on the exchange rate. If the home currency becomes weaker as

compared to USD, across the border transactions become more and more expensive. The above

chart shows the fluctuations of JPY as compared to USD.

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Item 5b

Tata Motors

Fig-11: Comparison between USD & INR

Tata Motors purchases several automobile parts from other countries. It also exports

vehicles. In both situations, Tata Motors completes the business transactions through USD.

Therefore, the exchange rates between INR and USD play an important role in deciding the

profitability of the company. The above chart gives the relationship between INR and USD. The

chart suggests that initially INR depreciated with respect to USD; however Indian rupee recovers

and appreciated during the first week of October 2015.

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Reference

Bartelloni, J. (2015, October 30). How Much Higher Can Starbucks Stock Price Go? (SBUX).

Retrieved November 1, 2015, from http://www.seeitmarket.com/how-much-higher-can-

starbucks-stock-price-go-sbux-14924/

Starbucks Delivers Record Quarterly Revenue of $4.9 Billion and Record Q3 EPS. (2015, July

23). Retrieved November 1, 2015, from https://news.starbucks.com/news/starbucks-q3-

fy15-earnings-press-release

US cold brew coffee sales grow 115% from 2014-2015. (2015, September 18). Retrieved

November 2, 2015, from http://www.mintel.com/press-centre/food-and-drink/us-cold-

brew-coffee-sales-grow-115-from-2014-2015

Quarterly Report 3Q 2015. (2015). Retrieved November 2, 2015, from

http://yara.com/investor_relations/quarterly_report/

Tata Motors up 8% on JLR Sep sales, Macquarie says top pick. (2015, October 15). Retrieved

November 2, 2015, from http://www.moneycontrol.com/news/buzzingstocks/tata-

motors8jlr-sep-sales-macquarie-says-top-pick_3603441.html

Goldman profit plunges as market turmoil hits bond trading. (2015). Retrieved November 2,

2015, from https://in.finance.yahoo.com/news/goldman-profit-plunges-market-turmoil-

141349020.html

Team, T. (2014, September 30). Starbucks' Full Ownership Of Japan Unit To Boost International

Revenue Growth. Retrieved November 2, 2015, from

http://www.forbes.com/sites/greatspeculations/2014/09/30/starbucks-full-ownership-of-

japan-unit-to-boost-international-revenue-growth