international equity market final

8/14/2019 International Equity Market FINAL

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A Report on

International Equity Market

GITAM INSTITUTE OF INTERNATIONAL BUSINESS

A Term Paper

In

International Financial Management

Under the Guidance of

Mr. M.V.S. Kameshwar Rao(Associate professor)

SUBMITTED BYMr. Goutam Dash (1224108128)

Mr. Hardik Shah (1224108129)

Mr. Kaushalendra Kumar (1224108131)

Mr. L. V. Srikanth (1224108134)

Ms. Rubina Rizwan (1224108148)

Ms. S. Naseema Tasneem (1224108151)


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CONTENTSSUBJECT PAGE NUMBER

1. Introduction1.1.Equity1.2.Equity market1.3.International equity markets1.4.Statistical perspective on internationalequity

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33

2. Market structure 63. International equity market benchmarks 74. Past, present and future trends of the equitymarket 12

5. Trading in International Equities 146. Factors affecting international equityreturns 18

7. Conclusion 198. Bibliography 21


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INTRODUCTIONEQUITY

The term equity or stock has different meanings in different contexts. A stock or any

other security representing an ownership interest; on a company's balance sheet -

the amount of funds contributed by the owners (the stockholders) plus the retained

earnings (or losses), also referred to as "shareholders' equity". In the context of

margin trading, the value of securities in a margin account minus what has been

borrowed from the brokerage. In the context of real estate, the difference between

the current market value of the property and the amount the owner still owes on the

mortgage. It is the amount that the owner would receive after selling a property and

paying off the mortgage. In terms of investment strategies, equity (stocks) is one of

the principal asset classes. These are used in asset allocation planning to structure a

desired risk and return profile for an investor's portfolio.

EQUITY MARKETAn equity market is most commonly known as the Stock Market. The equity market

is a public market for the purpose of trading stock and derivatives at agreed prices

set by the buyers and sellers. Some securities are traded on the stock exchange

whereas the others are traded privately. There are several stock exchanges in the

equity market (stock market). Exchanges are entities of mutual organizations, which

specialize in the business of bringing buyers and sellers together to a certain selected

group of stocks and securities. Some of the stock exchanges are the Bombay Stock

Exchange (BSE), and the National Stock Exchange (NSE) in India and the New York

Stock Exchange, Cincinnati Stock Exchange at the international forum. Investors use

these equity markets to buy stocks for investment purposes, or to sell them inorder

to raise capital. Stock markets are divided into two namely the primary market as

well as the secondary market. The primary markets are where new issues are sold

and the secondary markets are where all other trading occurs. They are an extremely

essential part of the capitalist system because each stock represents a piece ofownership in a company.
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INTERNATIONAL EQUITY MARKETSThe major international equity market is mainly divided into TWO parts:-

1. Developed Market: - Like USE, EU, JAPAN etc.In the case of a developed market, the investment is less risky than the emerging or

developing market. There are many players who rate the countries as a developed or

developing market based on various parameters.

2. Developing Market: - Like BRIC countries i.e. Brazil, Russia, India & Chinaalso known as Emerging Market.

The termemerging marketsis used by investment analysts to categorize countries thatare in a transitional phase between developing countries that are just beginning to

industrialize and countries that are fully developed. The main significance of the use

of the term is that investments in emerging markets are assumed to carry greater risk

and offer less safety in investment. The term is often used interchangeably with

developing markets, though this is somewhat inaccurate. Examples of emerging

markets include the BRIC countries (Brazil, Russia, India, and China), several

Southeast Asian countries, Eastern Europe, and parts of Africa and Latin America.

Emerging markets are characterized by strong economic growth, resulting in an

often marked rise in GDP and disposable income.

STATISTICAL PERSPECTIVE ON INTERNATIONAL EQUITYFor measuring the International Equity market we mainly used market capitalisation

method. Market capitalisation refers to the value or capitalization the market puts on

a company. It is calculated by multiplying the price of the stock by the number of

stocks issued.

The total market capitalization of all publicly traded companies in the world was

US$51.2 trillion in January 2007 and rose as high as US$57.5 trillion in May 2008

before dropping below US$50 trillion in August 2008 and slightly above US$40

trillion in September 2008. In 2003 - Total Mkt. Capitalization of world equity

markets was more than $32T. 89% of this ($28.29T) was from 31 developed

countries. And the other 11% of this was from developing countries. Some of these
http://en.wikipedia.org/wiki/Emerging_marketshttp://en.wikipedia.org/wiki/Emerging_marketshttp://en.wikipedia.org/wiki/Emerging_marketshttp://en.wikipedia.org/wiki/Developed_markethttp://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Safetyhttp://www.wikinvest.com/wiki/Indiahttp://www.wikinvest.com/wiki/Chinahttp://www.wikinvest.com/wiki/Chinahttp://www.wikinvest.com/wiki/Indiahttp://en.wikipedia.org/wiki/Safetyhttp://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Developed_markethttp://en.wikipedia.org/wiki/Emerging_markets


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countries have larger equity markets than smaller developed countries, e.g., Russia,

China, Brazil, S. Africa, Korea, and Taiwan are larger than New Zealand, Austria,

Ireland, Luxembourg, Finland, etc. High growth markets have been in the emerging

markets, like China (50% per year), Russia (90% per year), and they have attractedincreasing amounts of capital.

In 1990s the trend started for investment in emerging equity markets, and some

investment advisors suggest 50% of an ideal portfolio by 2005 should be in emerging

markets like Asia, Latin America and Eastern Europe (Russia). Prediction: "In 20

years China, Russia and India will be the biggest stock markets in the world, bigger

than the U.S. and Japan." As per the McKinsey report on BRIC countries by 2050China and India will the major service provider and Brazil and Russia will the major

raw-material provider to the world.

Capitalization of Equity Markets in Developed Countries (US$bn)


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From the data available we can clearly see that the Capitalization of Equity Markets

in Developed Countries have been decreasing after 1993 continuously that means

more investment flowing towards the emerging market and the developing nation

like the countries in Latin America and Asia pacific region. That can be seen from the

table below as the data little old we cannot able to portray the current situation butfrom different article it can say that due to global economy downturn many

investors have withdraw their money. So, the current situation is almost as per

2004.market capitalisation is a method where we can see the trend in the market.

Market Capitalization in Selected Emerging Markets (US$ bn)

One measure of stock market liquidity is the Turnover Ratio = Total Value of All

Market Transactions / Total Stock Market Value. Example: Total stock market value

is $5m, and there is $100m of market transactions during the year, the turnover is

$100m/$5m or 20x. The average stock has turned over 20 times during the year, or


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about every 2.5 weeks. In general, higher the Turnover Ratio, greater is the liquidity

of the secondary equity market. U.S. was one of the world's most liquid markets, along

with Sweden, Spain, Italy, etc. Most of the developed markets had turnover ratios of 50 or

higher (50-150). Some of the emerging markets have very low turnover ratios (Colombia,Philippines, Nigeria, etc.), especially the smaller markets. The larger markets have higher

turnover (Taiwan, India, Korea, China, Turkey, Brazil, etc.) Also, liquidity is improving for

many emerging markets (India, Russia, Egypt, etc) over time.

MARKET STRUCTUREThe market is divided into two major parts. Primary Markets i.e. shares offered for

sale directly from the issuing company and, Secondary Markets i.e. provide market

participants with marketability and share valuation.Secondary marketfor equity serves two purposes:

1. Marketability - Allows buyers in the primary market (IPO) to subsequently

sell shares. Would be hard to sell stock in primary market if there wasn't a

secondary market.

2. Share price valuation - Active trading in secondary markets establishes a

true fair market value of stock (vs. privately held stock like UPS before 1999).

Secondary Markets are set up as either:

1. Dealer Market - OTC, dealer network, like NASDAQ, where about 450

dealers ("market makers") specialize in buying/selling certain stocks. You are

buying (selling) the stock from (to) the dealer, not from (to) another investor, who

holds the stock in his/her account. Bid (dealer buys)- Ask (dealer sells) Spread is the

dealer's commission, e.g., $5(bid)-$5.05(ask), 1% spread. There are about 20 active

dealers/market makers for the average, actively traded stocks, close to 100 dealers

for high volume stocks. Only quotations are automated, actual trades do not take

place through the computer system, but require direct contact between the dealer

and a broker.


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2. Agency Market - like NYSE, AMEX. The broker takes a buy (sell) order

from a client/investor/trader, and matches it with a sell (buy) order from another

client/trader. Both OTC and exchange markets are Continuous Markets, where

trading takes place continually during the trading day. It is considered to be themost efficient one, especially for actively traded issues. Non-continuous trading

systems include the call market in France and the crowd trading in Spain.

3. Another system is the Fully Automated Trading system, common in

Toronto, New Zealand, Australia, etc. where trading is completely automated.

Similar to NASDAQ, but quotations and trading takes place directly by computer.

Orders are filled faster, and there is very few people are needed to operate anexchange.

4. Auction Market:- A market in which buyers enter competitive bids and

sellers enter competitive offers at the same time. The price a stock is traded

represents the highest price that a buyer is willing to pay and the lowest price that a

seller is willing to sell at. Matching bids and offers are then paired together and the

orders are executed. NYSE is an example of auction market. Auction markets differ

from over the counter where trades are negotiated.

International Equity Market BenchmarksBenchmarks/indexes of international stock market performance representing stocks

traded on the secondary market.

Several international stock market indexes are available:

1. Standard and Poors (S&P) publishes comparative stock market statistics

(emerging and developed markets) in its annual report "Emerging Stock Markets

Fact book." The S&P 500 is designed to be a leading indicator of U.S. equities and is

meant to reflect the risk/return characteristics of the large cap universe. Companies

included in the index are selected by the S&P Index Committee, a team of analysts

and economists at Standard & Poor's. The S&P 500 is a market value weighted index

each stock's weight is proportionate to its market value.


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The S&P 500 is one of the most commonly used benchmarks for the overall

U.S. stock market. The Dow Jones Industrial Average (DJIA) was at one time the

most renowned index for U.S. stocks, but because the DJIA contains only 30

companies, most people agree that the S&P 500 is a better representation of the U.S.market. Other popular Standard & Poor's indexes include the S&P 600, an index of

small cap companies with market capitalizations between $300 million and $2

billion, and the S&P 400, an index of mid cap companies with market

capitalizations of $2 billion to $10 billion.

2. MSCI - Morgan Stanley Capital International Designed to represent the

investable opportunity set for international investors, the MSCI International Equity

Indices are the most widely used global benchmarks in the industry. They are used

by over 2,300 organizations globally, as the benchmark for over 90% of all

international equity assets under management in the US1.

Calculated since 1969, the indices have become integral tools in the investment

process of international investors and are used:

for research in asset allocation models to benchmark and conduct performance measurement analysis as the basis of index linked products such as indexed funds, exchange traded

funds (ETFs), OTC and non-OTC derivatives, and futures and options

contracts.

To be useful tools in the investment process, indices must reflect the relevant market,

and be replicable and investable. To address this, MSCI Barra has evolved its index

methodology over time. Examples include enhancing the methodology to reflect

free-float adjusted market capitalization weighting in 2001/2002, and introducingcomprehensive market cap segmentation and adding Emerging Markets Small Cap

Indices in June 2007.

Since 1969, MSCI Barra's local research experts have applied a rigorous approach to

data collection and quality control. Today the company has over 50 research and

index specialists, gathering data and constructing indices across 70 markets.

The MSCI International Equity Indices consist of several index families, spanning

74 markets, designed to address the indexing and benchmarking needs of

institutional investors across a range of investment styles. They are mainly:-


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i) MSCI Global Investable Market Indicesii)MSCI Global Standard Indices: - Global regional and country indices covering 23

developed markets, 22 emerging markets & 29 frontier markets.

iii)MSCI Global Small Cap Indices: - Indices covering small cap securities for 23developed markets, 22 emerging markets & 6 GCC countries.

iv)MSCI Global Value & Growth Indicesv) MSCI GCC Countries Indices

(Source: - http://www.mscibarra.com/products/indices/equity/index.jsp)

3. Dow Jones Global Indexes - The Dow Jones Global Indexes (DJGI)

is a family of international equity indexes, including world, region, and country

indexes and economic sector, market sector, industry-group, and subgroup indexes.

The indexes are constructed and weighted using free-float market capitalization.

They provide 95 percent market capitalization coverage of developed markets and

emerging markets. In all, more than 3000 DJGI indexes provide real time and

historical data on more than 5500 companies around the world. Market

capitalization is float-adjusted. Indexes for the United States,Canada,Japan, Hong
http://www.mscibarra.com/products/indices/GIMI.htmlhttp://www.mscibarra.com/products/indices/GIMI.htmlhttp://www.mscibarra.com/products/indices/stdindex/http://www.mscibarra.com/products/indices/smallcap/http://www.mscibarra.com/products/indices/smallcap/http://www.mscibarra.com/products/indices/vg/http://www.mscibarra.com/products/indices/vg/http://www.mscibarra.com/products/indices/vg/http://www.mscibarra.com/products/indices/gcc/http://www.mscibarra.com/products/indices/gcc/http://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/w/index.php?title=Free-float_market_capitalization&action=edit&redlink=1http://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Hong_Konghttp://en.wikipedia.org/wiki/Hong_Konghttp://en.wikipedia.org/wiki/Hong_Konghttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/w/index.php?title=Free-float_market_capitalization&action=edit&redlink=1http://en.wikipedia.org/wiki/Stockhttp://www.mscibarra.com/products/indices/gcc/http://www.mscibarra.com/products/indices/vg/http://www.mscibarra.com/products/indices/smallcap/http://www.mscibarra.com/products/indices/stdindex/http://www.mscibarra.com/products/indices/GIMI.html


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Kong, Singapore, and Australia/New Zealand are constructed to cover 95 percent of

market capitalization at the country level. A single European index covers an

aggregate of all Western European nations, also representing 95 percent of the

aggregate market. An Emerging Markets Index represents 10 countries in LatinAmerica and Asia. Each of these three groups offers large-cap, mid-cap, and small-

cap indexes. Dow Jones Style Indexes are built as subsets of the Dow Jones U.S. Total

Market Index. The DJGI family includes indexes for 10 economic industries, 19 super

sectors, 41 sectors, and 114 subsectors. The indexes are reviewed quarterly.

World Equity Benchmark Shares: - World Equity Benchmark Shares (WEBS) were

introduced for trading on the American Stock Exchange in March, 1996. WEBS arean excellent way for investors to internationally diversify their investment portfolio.

With the purchase of a WEBS unit, an investor achieves exposure to a diversified

equity portfolio within a specific country. Country-specific baskets of stocks

designed to replicate the country indexes of 20 countries and 3 regions. WEBS are

subject to U.S. SEC and IRS diversification requirements. Low cost and convenient

way for the investors to hold diversified investments in several different countries.

International Stock Indexes

Index(Region/Country)

YTD High Low % Chg 3-yr

% chg % chg

Global

The Global Dow(World)

24.4 2186.63 1139.9 -13.2 0.3

The Global Dow

(Euro) (World)

17.5 1403.64 849.42 -13.4 -4.2

DJ Global Index(World)

26.1 236.85 130.29 -8.4 -4.9

DJ Global ex U.S.(World)

32.3 205.21 111.8 -5.4 -3.7

MSCI EAFE*(World)

25.6 1701.36 911.39 -8.7 -5.9

DJ CBN China 600(China)

67.3 29890.92 12886.57 40 29.6

Dow Jones China 88

(China)

61.1 327.69 149.53 29.2 29.8

Shanghai 56.7 3471.44 1706.7 24.2 18.3
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Composite (China)

Hang Seng(HongKong)

46.3 21768.51 11015.84 11.2 6.2

Bombay Sensex

(India)

73.9 16886.43 8160.4 23.9 11.1

Jakarta Composite(Indonesia)

82.2 2468.9 1111.39 32 17.8

Nikkei 300 (Japan) 9.4 235.94 140.76 -18.8 -14.7

Nikkei Stock Avg(Japan)

19 12006.53 7054.98 -12.2 -12.3

Topix Index(Japan)

10.6 1153.95 700.93 -17.7 -15.3

Kuala Lumpur

Composite(Malaysia)

38.9 1221.2 829.41 18.9 8.1

NZSX-50 (NewZealand)

15.3 3237.72 2417.95 -3.3 -3.7

KSE 100 (Pakistan) 65.6 9713.83 4815.34 5.8 -2

Manila Composite(Philippines)

51.5 2886.96 1704.41 10.6 3.9

Straits Times(Singapore)

51.4 2685.94 1456.95 9.1 2.6

Kospi (South Korea) 50.6 1718.88 938.75 12.8 7.9

Colombo StockExchange (Sri Lanka)

92.2 2944.05 1484.53 30.6 7.4

Weighted(Taiwan)

59.5 7526.55 4089.93 20.8 2.1

SET (Thailand) 61.9 730.52 384.15 17.3 2.2

FTSE 100 (U.K.) 14.5 5197 3512.1 -2.3 -4.5

FTSE 250 (U.K.) 43 9364.08 5491.46 7.8 -2.4

Sao Paulo

Bovespa (Brazil)

59.9 61493.39 29435.11 15.9 19.9

S & P/TSX Comp(Canada)

25.6 12546.51 7566.94 -10 -0.9

Johannesburg AllShare (South Africa)

17.9 25920.77 17814.42 1.7 4.8

(Sources: Thomson Reuters; WSJ Market Data Group AS ON 25th of September 2009)

From the above table we can clearly able to identify that which stock market is doing

well and also have a positive growth in the last three year. It was clear that the BRIC

countries have did well in the last three year.


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PAST, PRESENT AND FUTURE TRENDS OF THE EQUITYMARKET


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From the above graphs we can infer that all the major equity markets are recovering

from economic downturn.


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Trading in International EquitiesAfter 1990 we have seen increased global integration of world equity markets due to

liberalization of most of the world economy. Investors wants generate more profit

by diversifying their portfolio and many more reason like:-

1. Investors seeking international portfolio diversification.

2. Increased capital mobility. Barriers to international capital flows

(elimination of fixed commissions, deregulation of financial markets, etc.) have been

reduced. Introduction of Euro has integrated European financial markets.

3. Advances in Information Technology have facilitated capital flows,

research and intl. investing.

4. MNCs have expanded global operations, and have taken advantage of

global capital markets.

1. Cross-Listing of Shares2. The European Stock Market3. American Depository Receipts

Cross-Listing of Shares is when a firm (MNC) lists/sells its shares on one or more

foreign exchanges in addition to the domestic exchange. Example: GM might list onNYSE, and on the exchanges in London and Paris. Honda, Toyota and Yamaha list

on the NYSE, in addition to Tokyo. Cross listing of shares become famous because

of many reason:-

1. Increased liquidity, broader investor base. Increased global demandmay support a higher stock price.

2. Cross-listing improves name recognition globally in new capitalmarkets. May make it easier in future to raise additional equity or debt

capital globally, get a higher price for stock, lower interest rate for debt.

3. Company may benefit as more consumers and investors becomefamiliar with the company and it products. Consumers who like the

company's products may be more likely to invest in the company, and

investors in the company may be more likely to become consumers of

the company's products.

4. May make it harder for an unwanted, hostile takeover due to thediversified, global stockholder base.


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Cross Listing and Regulations:-

When a company cross lists its share it is subject to: Both, home and host country regulations!

For foreign firms listing in the U.S. this means:

1) Meeting the disclosure requirements of the SEC, for example, reconsolidation ofthe companys financial statements to U.S. standards.

a) Differences around the world in accounting standards.b) Foreign firms can bypass these requirements through rule 144A (private

placement) sales to qualified institution buyers. These buyers are generally

pension funds, asset managers, or insurance companies

2) Meeting the Sarbanes-Oxley Act (2002):a) To improve quality and transparency in financial reporting and independent

audits.

b) The role of corporate governance and the role of those who manage corporategovernance have changed substantially. Requires management certification of

financial statements.

3) Fees as set by the foreign exchange: - Listing and annual fees are charged

So, there is also some different type of regulation in Japan market.

The European Stock Market includes the various Stock Exchanges spread all across

Europe. Every European Stock Exchange is significant in molding the European

Stock Market into a profitable as well as investor-friendly Stock Market.

Some of the Stock Exchanges that have made the European Stock Market what it is

today are:

Euronext N.V. - This pan-European Stock Exchange is the fifth in the world in terms

of market capitalization. Headquartered in Paris, it also has branches in Belgium,

Netherlands, Portugal and the United Kingdom (LIFFE) and deals in equities and

derivatives besides offering clearing and information services. This Stock Exchange

of the European Stock Market merged with NYSE Group to constitute the first global

stock exchange - NYSE Euronext.

The two indexes (indices) controlled by Euronext N.V. are:-

1. Euronext 100 Index (blue chip index):-


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2. CAC 40 London Stock Exchange (LSE) - a hugely profitable Stock Exchange, fromtime to time the LSE has rejected takeover bids from Deutsche Brse (Frankfurt

Stock Exchange operator), Macquarie Bank and NASDAQ . These go to prove the

demand that this Exchange from the European Stock Market enjoys in the global

scenario.

European Stock Market can be classified into four main types according to their

methods of The LSE is segregated into:

1) Main Market2) Alternative Investments Market (AIM)3) EDX London - which deals in derivatives4) The FTSE Group, an independent organization, evaluates the LSE through the

following indexes(indices):

I. FTSE 100 IndexII. FTSE 250 Index

III. FTSE 350 IndexFWB Frankfurter Wertpapierbrse (Frankfurt Stock Exchange) - presently known asthe Deutsche Brse AG, this Stock Exchange belonging to the European Stock

Market is managed by Deutsche Brse which owns it along with the European

Electronic Exchange - Eurex. In terms of turnover the FSE ranks third in the world

and is ranked sixth in terms of market capitalization. The major trading index of the

Frankfurt Stock Exchange is DAX or DAX 30.

American Depository Receipts (ADRs) - the most efficient and common method of

selling foreign stocks in the U.S. market. ADRs are an example of financial

engineering, the creation and marketing of new securities from underlyingsecurities, e.g., stripped zero coupons, Mortgage Backed Securities (MBSs) like

CMOs and pass-throughs. ADR process:

1. A number of foreign shares (stock certificates) are placed on deposit (in

escrow) in the home country (Russia, China, or India) with a custodian bank or

financial intermediary.

2. The ADRs are then traded in the U.S. stock market, on NYSE or NASDAQ,

like stocks (Level II).


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Advantages of ADRs:

1. ADRs are priced in dollars, trade on a U.S. exchange, and can be purchasedthrough a regular broker. If foreign shares were purchased directly, it would

involve a) working with a broker in Russia or China, b) foreign currencyexchange, and c) arrange for shipment of stock certificates.

2. Dividends for ADRs are collected and converted to dollars by the custodian.3. Like U.S. stocks, ADRs clear in three days.4. ADRs are registered shares, not bearer securities like many foreign shares,

offering greater protection of ownership rights.

5.

ADRs can be easily traded by transferring the depository receipt to anotherinvestor in the U.S. market.

6. ADRs typically trade at a multiple of the underlying shares, to adjust the priceup (or down) to a normal trading range for U.S. ($5-$50), e.g., ratios of 1:10 or

1:.25.

ADR trading: OTC (Level I) - more than 1,000 ADRs are traded, Level IIs: NASDAQ

(300 ADRs), NYSE (350 ADRs), and AMEX (3 ADRs). Note: One company can have

several ADRs listed at once, and can also be listed on more than one exchange.

Level I ADRs are sold OTC. Easiest, least expensive and least regulated way for

foreign companies to market ADRs in U.S., require minimal SEC registration.

Foreign companies can build a presence here and generate interest among investors.

Level I ADRs cannot be used to raise new capital. Not as liquid as Level II ADRs.

Level II ADRs are sold on NASDAQ, NYSE and AMEX, stricter SEC requirements,

more liquid market.

Level III ADRs are used to raise new equity capital in U.S. markets.

Typical countries represented in ADR markets: Russia, Brazil, China, Turkey, South

Africa, Mexico, India, etc. Typical industries: Banking, mining, chemicals, textiles,

oil and gas, airlines, electric utilities, machinery, real estate, etc. S&P now has the

S&P ADR Index of 260 U.S.-listed ADRs, at levels II and III and global shares.

Mutual funds can be set up to buy the S&P ADR Index, just like the S&P 500 Index.

Global Registered Shares (GRS) started as new equity shares. A share issued and

registered in multiple markets around the world. Global registered shares representthe same class of shares. Also known as a "global share". These shares are issued in


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the U.S. and registered in different countries, thereby making them foreign

securities. They provide shareholders across the globe with equal corporate rights.

Global registered shares should not be confused with American depositary receipt

(ADRs) or global depositary receipts (GDRs), which are domestic securities

representing a foreign (outside the U.S.) interest.

Factors Affecting International Equity Returns1) Macroeconomic Factors

International monetary variables (such as Interest rate differentials, change in

domestic inflation expectations) have only weak influence on equity returns

in comparison to domestic variables.

2) Exchange RatesExchange rate movements in a given country appear to reinforce the stock

market movements within that country.

3) Industrial StructureStudies examining the influence of industrial structure on foreign equity

returns are inconclusive.


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CONCLUSIONIn terms of investment strategies, equity (stocks) is one of the principal asset classes.

These are used in asset allocation planning to structure a desired risk

and return profile for an investor's portfolio.

The major international equity market is mainly divided into two parts developed

market (Like USE, EU, JAPAN etc.) and developing market (BRIC countries i.e.

Brazil, Russia, India & China) it is also known as Emerging Market.

The total market capitalization of all publicly traded companies in the world was

US$51.2 trillion in January 2007 and rose as high as US$57.5 trillion in May 2008

before dropping below US$50 trillion in August 2008 and slightly above US$40

trillion in September 2008.

From the analysis of global stocks available from Standard & Poor we found that the

Capitalization of Equity Markets in Developed Countries has been decreasing after

1993 continuously. That means more investment flowing towards the emerging

market and the developing nation like the countries in Latin America and Asia

pacific region.

Turnover Ratio is also a method to measure liquidity of the market. Higher the

Turnover Ratio, greater is the liquidity of the secondary equity market. U.S. was one

of the world's most liquid markets, along with Sweden, Spain, Italy, etc. Most of the

developed markets had turnover ratios of 50 or higher (50-150). Some of the emerging

markets have very low turnover ratios (Colombia, Philippines, Nigeria, etc.), especially the

smaller markets as compared to the larger markets that have higher turnover ratios.

The market is divided in to two major parts. Primary Markets i.e. shares offered for

sale directly from the issuing company and the Secondary Markets i.e. provide

market participants with marketability and share valuation.

Secondary market for equity serves two purposes marketability and share price

valuation of the equity.


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Benchmarks/indexes of international stock market performance representing stocks

traded on the secondary market. Several international stock market indexes are

available and these include Standard and Poors (S&P), MSCI - Morgan Stanley Capital

International and Dow Jones Global Indexes etc.

Global integration of world equity markets have been increased due to liberalization

of most of the world economy after 1990.

American Depository Receipts (ADRs) is one of the most efficient and common

method of selling foreign stocks in the U.S. market. ADRs are an example of

financial engineering, the creation and marketing of new securities from underlying

securities, e.g., Stripped Zero Coupons, Mortgage Backed Securities (MBSs) like

CMOs and pass-through. The other efficient way is Global Registered Shares. They

provide shareholders across the globe with equal corporate rights. Global Registered

Shares should not be confused with American Depositary Receipt (ADRs) or global

depositary receipts (GDRs), which are domestic securities representing a foreign

(outside the U.S.) interest.

The study of the International Equity Market concluded that the factors affecting

International Equity Returns are macroeconomic factors like International monetary

variables (such as interest rate differentials, change in domestic inflation

expectations), Exchange Rates movements and Industrial Structure of that country.


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BIBLOGRAPHY1. http://www.investopedia.com/terms/e/equity.asp2. http://www.teenanalyst.com/glossary/e/equitymarket.html3. http://epaper.timesofindia.com/Default/Client.asp?Daily=ETD&showST=tr

ue&login=default&pub=ET&Enter=true&Skin=ETNEW&GZ=T

4. http://www.mscibarra.com/products/indices/equity/index.jsp5. http://www2.standardandpoors.com/spf/pdf/index/093008_worldbynumber

s_rpt.pdf?vregion=us&vlang=en

6. http://www.crosslisting.com/7. http://www.tradingeconomics.com/8. http://www.economywatch.com/market/stocks/european.html9. http://www.euronext.com10.http://www.adr.com11.www.wikipedia.comfor definitions12.http://www.dowjones.com/13.International Equity Markets Outlook 2009
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