Emerging Market

& Instruments In Emerging

Market

Made by

SandhiYA
and Hemend chandran

Introduction
The

term Emerging Markets appeared in the beginning of the

1980s and was initially used to designate financial markets
location in developing countries according to world bank.

Emerging

markets are sought by investors for the prospect of high

returns, as they often experience faster economic growth as
measured by GDP. Investments in emerging markets come with
much greater risk due to political instability, domestic
infrastructure problems, currency volatility and limited equity
opportunities (many large companies may still be "state-run" or
private). Also, local stock exchanges may not offer liquid markets
for outside investors.

Instruments In Emerging Market

FOLLOWING ARE THE INSTRUMENTS IN EMERGING MARKETS

AMERICAN DEPOSITORY RECEIPTS (ADRS)

GLOBAL DEPOSITORY RECEIPTS (GDRS)

FOREIGN CURRENCY CONVERTIBLE BOLDS

FOREIGN BONDS

GLOBAL MUTUAL FUNDS

AMERICAN DEPOSITORY RECEIPT (ADR)

It

is a negotiable security representing securities of a nonUS company trading in the US financial markets

It

is denominated in US dollars and may be traded like

regular shares of stock

Securities

of a foreign company that are represented by an

ADR are called American depository Shares(ADSs)

INFOSYS

Technologies
company to issue ADRs

Ltd

was

the first

Indian

GLOBAL DEPOSITORY RECEIPT (GDR)

It

is issued by one countrys bank as negotiable certificate

and is traded on the stock exchange of another country
against a certain number of shares held in its custody.

Normally
It

1 GDR = 10 shares, but not always.

is denominated in some freely convertible currency.

GDRs

are often listed in Luxembourg, London,

Frankfurt, Singapore and Dubai Stock Exchange.

Reliance

Industries was the first Indian company to

issue GDRs.

FOREIGN CURRENCY CONVERTIBLE BONDS (FCCB)

They

are debt instruments issued in a currency

different than the issuers domestic currency with an
option to convert them in common shares of the issuer
company

The

interest on FCCBs is generally 30% -40% less

than on normal debt paper or foreign currency loans

Maturity

period of FCCB is 5 years but there is no

restriction on time period for converting FCCB into
shares

Foreign Bond
A bond that is issued in domestic market by a foreign
entity, in the domestic markets currency. A foreign bond is
the most often issued by a foreign firm to raise capital in a
domestic market that would be more interested in
purchasing the firms debts.
For foreign firms doing a large amount of business in the
domestic market, issuing foreign bonds is a common
practice. Types of foreign bonds include Bulldog
bonds(British capital market), Matilda bonds(Australian
capital market) and Samurai bonds(Japanese capital
market).

Global Mutual Funds

A

type of mutual fund, closed-end fund or exchange-traded fund that can

invest in companies located anywhere in the world, including the investor's
own country. These funds provide more global opportunities for
diversification and act as a hedge against inflation and currency risks.

Just

as buying shares in a domestic equity mutual fund is similar to buying

domestic stocks, buying shares in global and international mutual funds is
similar to buying shares in the foreign stocks.

The

big benefit of buying foreign stocks through a fund is that the global
mutual funds not only spreads money among numerous stocks, they also
can spread money among numerous countries.