International Capital Markets

*Some Effects of Transactions on the International Capital Market*

A natural consequence of allowing investors to invest freely internationally is that investors can unwittingly significantly change investment and growth patterns throughout the world. As an example there has recently been the perception that the BRIC countries have a significantly higher growth potential than developed economies (USA, Europe, non-China Asia). Investors may therefore withdraw investments from these developed economies thereby reducing available capital and potentially impacting on stock and bond prices. Similar they may invest in these BRIC countries, providing them even more capital and raising their stock markets.

The international capital market also created the possibility of the 'carry trade'. Investors in developed countries could sell bonds in their home currency, where the interest rate is low ( typically 1 percent) and buy country bonds internationally where interest rates are high (typically >5%). Even after transaction costs the investor gains on interest.

Capital market has the function as follows:

a. As intermediaries in trading securities, long-term.

b. As a guarantor in the issuance of long-term securities.

c. Help provide loans to companies by buying bonds issued.

d. Helping companies to enlarge their business capital through the sale of shares.

e. Simplify and accelerate the monetization of securities as well as trying to improve the circulation of securities (securities).

f. Encourage and develop business activities.

g. Enhance and create equitable distribution of income for the community.

h. Spur national economic growth.

i. As a secondary market, meaning that the stock exchange not only serves as the capital markets, but also as the money market. The second function is called the secondary market.

j. As a collector of public funds to boost economic growth.