FDI = Foreign Direct Investment.
This could happen when it is too pricey to make it in your own country or if you have a mature market you could move to another country for a new market and then it is made over there which could cut out costs of importing and exporting.
FDI is a long haul idea it is hard to reverse it, Development of FDI is already with developed countries such as USA, China etc not developing countries. This is because there is a lower economic and political risk you cannot 100% predict what will happen in the economy, But you are more guaranteed that things such as political war will not break out eg-Libya. This has a knock on affect on surrounding countries causing ripples for other countries to follow suit in toppling their government. Because these countries are richly endowed with natural resources eg oil, it will affect rapidly growing markets in other countries that need imports and exports as it all depends on transporting, and if you dont have the right infrastructure you will not have the right FDI.
FDI shows to me why there are followers as it encourages new growth, A leader will go because of MSW and risk which encourages companies to persue it if the rate of return is right. In the news at the minute, because of new regulations, there is fear a number of uk banks could move their headquarters abroad.
Quoted in the Telegraph(30th March) - Barclays shareholders are suffering because of uk authorities reluctance to allow them to return to their pre-crisis level of payout. An options paper out next month may force banks to seperate their "casino" investment, and if this happens it might force banks to protect their economic service.
Banks might move to China,USA etc as these are already developed countries as there could be a lower economic risk. The UK is a front runner in the financial sector it is what continues to make the "machine" run.I wonder what would happen if this did happen it would be a huge blow as we are so dependant on this sector. We need to encourage more businesses that can produce raw materials in the UK so we maybe have a service to fall back on.
Wednesday, 30 March 2011
Wednesday, 23 March 2011
Blog 6
Portugal on Callapse!
The European central bank have already helped Portugal by buying its government debt, This uncertainty creates panic in investors which shows there is no stability. Standards of limit plunge and prices become more competitive. This shows there is risk and risk does not help MSW. The Euro has dipped because of the uncertainty that portugal need a bailout from the EU. In lecure 4 we learnt about syndicated loans,which could spread risk of borrowing between the banks. This is generally used by the government as it would be a big bailout. This is what happened in the case study discussed in the lecture, When five japanese banks financed a takeover of the third largest broker. But the UK government will eventually want their money back from bailouts. The uk have to be carefull when doing this, as we are in a credit crunch and a domino will start to take place. The market is a "bear" one at the minute and everybody is hibernating so to speak and watching what they spend and no-body is borrowing money out, But if there is no fuel (money) to keep the machine oiled it will not work. Costs cannot be cut too hard and too fast it needs to be kept at a happy medium. The crisis that happened in the breakdown of Greece, One contributor was allowing civil servants to retire on full pensions after serving 20 years, their pension system could not stand this, The budget is published tomorrow it would be interesting to see what happens with the UK's state pension. Confidence needs to be maintaind with key stakeholders and customers to keep uncertainty within the market to a minimum so not to cause panic, As this situation can only get worse before it gets better.
The European central bank have already helped Portugal by buying its government debt, This uncertainty creates panic in investors which shows there is no stability. Standards of limit plunge and prices become more competitive. This shows there is risk and risk does not help MSW. The Euro has dipped because of the uncertainty that portugal need a bailout from the EU. In lecure 4 we learnt about syndicated loans,which could spread risk of borrowing between the banks. This is generally used by the government as it would be a big bailout. This is what happened in the case study discussed in the lecture, When five japanese banks financed a takeover of the third largest broker. But the UK government will eventually want their money back from bailouts. The uk have to be carefull when doing this, as we are in a credit crunch and a domino will start to take place. The market is a "bear" one at the minute and everybody is hibernating so to speak and watching what they spend and no-body is borrowing money out, But if there is no fuel (money) to keep the machine oiled it will not work. Costs cannot be cut too hard and too fast it needs to be kept at a happy medium. The crisis that happened in the breakdown of Greece, One contributor was allowing civil servants to retire on full pensions after serving 20 years, their pension system could not stand this, The budget is published tomorrow it would be interesting to see what happens with the UK's state pension. Confidence needs to be maintaind with key stakeholders and customers to keep uncertainty within the market to a minimum so not to cause panic, As this situation can only get worse before it gets better.
Thursday, 17 March 2011
5th blog
If the market was perfectly fair, There would be no arbitrage in the market. This is an additional return for no additional risk. There is only small pockets of opportunities for arbitrage, as the market corrects itself. So economists need to have constant knowledge of the stock market to evaluate risk and opportunities. Also trading has to be done in true exchange rates. The true exchange rates are set by supply an demand. You need to be concerned about the Euro,Dollars,Yen,etc, As exchange rates fluctuate. This will cause risk exposures for companies trading internationally. Strong currency could deter exporters but low currency could encourage exporters. Transaction,Translation and Economic exposures could add to the risk mix.
An example of an indirect economic exposure that is happening in the world today, is the catastrophic natural disaster in Japan. There has been an adverse change in the stock market, quoted in the Telegraph(Thursday 17th March 2011)-"The FTSE 100 edged higher on the hopes that the G7 will act to calm financial markets after the esculating crisis at Japans earthquake-damage nuclear plant sent the Yen soaring to a post-war high and shares falling". This is going to damage Japans exporters which may push them further into crisis. Fears of leakages at the nuclear plant has wiped billions of dollars off the stock market. To conclude, There will be a knock on affect to the global stock market in coming months because of this disaster and other political conflicts in the world. Governments and companies may need to internally hedge so to spread the risk of any investments drying up because of cash flow due to the stock market, so they are reducing the costs related to financial distress. I will keep an eye on what happens in the coming weeks.
An example of an indirect economic exposure that is happening in the world today, is the catastrophic natural disaster in Japan. There has been an adverse change in the stock market, quoted in the Telegraph(Thursday 17th March 2011)-"The FTSE 100 edged higher on the hopes that the G7 will act to calm financial markets after the esculating crisis at Japans earthquake-damage nuclear plant sent the Yen soaring to a post-war high and shares falling". This is going to damage Japans exporters which may push them further into crisis. Fears of leakages at the nuclear plant has wiped billions of dollars off the stock market. To conclude, There will be a knock on affect to the global stock market in coming months because of this disaster and other political conflicts in the world. Governments and companies may need to internally hedge so to spread the risk of any investments drying up because of cash flow due to the stock market, so they are reducing the costs related to financial distress. I will keep an eye on what happens in the coming weeks.
Tuesday, 8 March 2011
Blog 4
This weeks lecture consisted of international stock exchanges and stock market efficiency. New york,Tokyo and Japan are the three main players in the stock exchange because of the time difference, We get a 24 hour stock exchange. London is a world player and if theres mergers this can create MSW. In the news at the minute, There is speculation that there will be a German takeover of the New York stock exchange and if that happened there would be a massive ripple in the financial market.
The problem with the mergers is that it could lead to different rules and regulations, But the positive side is that more competition leads to stock trading being less profitable, So the answer is to get bigger and get rid of the competition to become a monopoly. More mergers may be on the way so they become more successful if they have the same idea to create MSW, 2 heads are better than one so to speak, It will create a group that will dominate european trading. Because of advances in global financial markets i.e, changes in technology it is easier to trade because more can take place now because of the speed of technology.
This has to be accessed and managed properly because of the risk factor, as this is the seed of destruction. So the question is- Is mergers of the stock market the way forward? = Yes if the risk is managed correctly and it increases MSW.
The problem with the mergers is that it could lead to different rules and regulations, But the positive side is that more competition leads to stock trading being less profitable, So the answer is to get bigger and get rid of the competition to become a monopoly. More mergers may be on the way so they become more successful if they have the same idea to create MSW, 2 heads are better than one so to speak, It will create a group that will dominate european trading. Because of advances in global financial markets i.e, changes in technology it is easier to trade because more can take place now because of the speed of technology.
This has to be accessed and managed properly because of the risk factor, as this is the seed of destruction. So the question is- Is mergers of the stock market the way forward? = Yes if the risk is managed correctly and it increases MSW.
Tuesday, 1 March 2011
Blog 3
On the first lecture, We looked at an Empirical survey this indicated mission statements within countries. The outcome showed that their corporate social responsibility to MSW was a low percentage in valueing its importance. This is quite suprising, As MSW is the core value depending on what you do with the market share in the short term it can affect it in the long term. Welfare of employees is quite a good strategy to have as this creates productivity. People who love the company and who love working for them helps to create a good impression to outsiders and that can drive MSW. You can also link rewards to shareholder wealth improvements. If you have a goal,(goal congruence) which requires you to bring your different ideas together to please people, But Jenson 2010 quoted "Multiple objectives is no objective" i:e Trying to please everybody-Managers,employees and stakeholders. You have to concentrate on the most important one as you cannot please everybody and that is the shareholder to MSW. The problem is they all should want the same aim.
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