InternationalFinancialManagement2国际财务管理课件精编版

Chapter2ExchangeRatesandInternationalFinancialMarkets1ObjectivesThischapterprovidesafoundationforunderstandinghowexchangeratesaredetermined,alsoidentifiesanddiscussesthevariousinternationalfinancialmarketsusedbyMNCs.Thespecificobjectivesare:*toexplainhowtheequilibriumexchangerateisdetermined;*toexaminefactorsthataffecttheequilibriumexchangerate;and*todescribethebackgroundandcorporateuseoftheinternationalfinancialmarkets.2DeterminationofEquilibriumExchangeRate?Anexchangeratemeasuresthevalueofonecurrencyinunitsofanothercurrency.?Whenacurrencydeclinesinvalue,itissaidtodepreciate.Whenitincreasesinvalue,itissaidtoappreciate.?Thepercentagechangeinthevalueofaforeigncurrencyiscomputedas(St–St-1)/St-1(whereStdenotesthespotrateattimet.)3DeterminationofEquilibriumExchangeRate?Anexchangeraterepresentsthepriceofacurrency,whichisdeterminedbythedemandforthatcurrencyrelativetothesupplyofthatcurrency.?Theequilibriumexchangerateisthepointwherethedemandforonecurrencyequatesthesupplyofthatcurrency.?Theequilibriumexchangeratewillchangeovertime.4FactorsthatInfluenceExchangeRates?RelativeInflationRates?RelativeInterestRatesItisusefultoconsiderrealinterestrates?RelativeIncomeLevels?GovernmentControls*foreignexchangebarriers;*foreigntradebarriers;*interveningintheforeignexchangemarket;*affectingmacrovariables.5FactorsthatInfluenceExchangeRates?Expectations*Foreignexchangemarketsreacttoanynewsthatmayhaveafutureeffect.*Institutionalinvestorsoftentakeacurrencypositionsbasedonanticipatedinterestratemovementsinvariouscountries.*Becauseofspeculativetransactions,foreignexchangeratescanbeveryvolatile.6FactorsthatInfluenceExchangeRates?InteractionofFactors*Trade–relatedfactors(inflationdifferential,incomedifferentialandgovernment'straderestrictions)andfinancialfactors(interestratedifferential,capitalflowrestriction)sometimesinteract.Exchangeratemovementsmaybesimultaneouslyaffectedbythesefactors.*Overaparticularperiod,differentfactorsmayplaceopposingpressuresonthe7valueofaforeigncurrency.FactorsthatInfluenceExchangeRates?Thesensitivityoftheexchangeratetothesefactorsisdependentonthevolumeofinternationaltransactionsbetweenthetwocountries.?Summaryofhowfactorscanaffectexchangerates:Exhibit2.1.8Exhibit2.1SummaryofHowFactorsCanAffectExchangeRatesTrade-RelatedFactorsInflationDifferentialIncomeDifferentialGov'tTradeRestrictionsU.S.DemandforForeignGoodsForeignDemandforU.S.GoodsU.SDemandfortheForeignCurrencySupplyoftheForeignCurrencyforsaleExchangeRateBetweentheForeignCurrencyandtheDollarFinancialFactorsInterestRateDifferentialU.S.DemandforForeignSecuritiesU.S.DemandfortheForeignCurrencySupplyoftheForeignCurrencyforSaleCapitalFlowRestrictionsForeignDemandforU.S.Securities9QuestionsandApplications?AssumethattheUnitedStatesInvestsheavilyingovernmentandcorporatesecuritiesofCountryK.Inaddition,residentsofCountryKinvestheavilyintheUnitedStates.Approximately$10billionworthofinvestmenttransactionsoccurbetweenthesetwocountrieseachyear.Thetotaldollarvalueoftradetransactionsperyearisabout$8million.Thisinformationisexpectedtoalsoholdinthefuture.10QuestionsandApplicationsBecauseyourfirmexportsgoodstoCountryK,yourjobasinternationalcashmanagerrequiresyoutoforecastthevalueofcountryK'scurrency(the“krank)withrespecttothedollar.Explainhoweachofthefollowingconditionswillaffectthevalueofthekrank,holdingotherthingsequal.Then,aggregatealloftheseimpactstodevelopanoverallforecastofthekrank'smovementsagainstthedollar.11QuestionsandApplicationsa.U.S.Inflationhassuddenlyincreasedsubstantially,whileCountryK'sInflationremainslow.b.U.S.interestrateshaveincreasedsubstantially,whileCountryK'sinterestratesremainslow.Investorsofbothcountriesareattractedtohighinterestrates.12QuestionsandApplicationsc.TheU.S.Incomelevelhasincreasedsubstantially,whileCountryK'sincomelevelhasremainedunchanged.d.TheUnitedStatesisexpectedtoimposeasmalltariffongoodsimportedfromCountryk.e.Combineallexpectedimpacttodevelopanoverallforecast.13InternationalFinancialMarketsTopicsforclassdiscussion:1.Whereistheforeignexchangemarket?2.Whydoesaforeignexchangemarketexist?3.Whichinternationalfinancialmarketsaremostimportanttoafirmthatconsistentlyneedsshort-termfunds?Whataboutafirmthatneedslong-termfunds?14ForeignExchangeMarket?Theforeignexchangemarketallowscurrenciestobeexchangedinordertofacilitateinternationaltradeorfinancialtransactions.?Thesystemforestablishingexchangerateshasevolvedovertime:*goldstandard;*periodofinstability;*BrettonWoodsAgreement;*SmithsonianAgreement;*floatingexchangeratesystem.15ForeignExchangeMarket?ForeignExchangeTransactions*spotmarket&forwardmarket(readtherelatedmaterialsaboutthosemarkets);*bid/askspreadofbanks;(examples)*foreignexchangequotationsdirectquotations(numberoflocalcurrencyperforeigncurrency)indirectquotationscrossexchangerate(howtocompute)*Currencyfutures&optionsmarkets16EurocurrencyMarket?U.S.dollardepositsplacedinbanksinEuropeandothercontinentsarecalledEurodollars.?Inthe1960sand70s,theEurodollarmarket,orwhatisnowreferredtoastheEurocurrencymarket,grewtoaccommodateincreasinginternationalbusinessandtobypassstricterU.S.regulationsonbanksintheU.S.17EurocurrencyMarket?TheEurocurrencymarketismadeupofseverallargebankscalledEurobanksthatacceptdepositsandprovideloansinvariouscurrencies.?AlthoughtheEurocurrencymarketfocusesonlarge-volumetransactions,therearetimeswhennosinglebankiswillingtolendtheneededamount.AsyndicateofEurobanksmaythenbecomposedtounderwritetheloans.18EurocurrencyMarket?TheEurocurrencymarketinAsiaissometimesreferredtoseparatelyastheAsiandollarmarket.*TheprimaryfunctionofbanksintheAsiandollarmarketistochannelfundsfromdepositorstoborrowers.*Anotherfunctionisinterbanklendingandborrowing.19EurocreditMarket?LoansofoneyearorlongerareextendedbyEurobankstoMNCsorgovernmentagenciesintheEurocreditmarket.TheseloansareknownasEurocreditloans.Floatingratesarecommonlyused,sincethebank'sassetsandliabilitymaturitiesmaynotmatch.20EurobondMarket?Therearetwotypesofinternationalbonds.*Bondsdenominatedinthecurrencyofthecountrywheretheyareplacedbutissuedbyborrowersforeigntothecountryarecalledforeignbondsorparallelbonds.*BondsthataresoldincountriesotherthanthecountryrepresentedbythecurrencydenominatingthemarecalledEurobonds.21EurobondMarket?Eurobondsareunderwrittenbyamultinationalsyndicateofinvestmentbanksandsimultaneouslyplacedinmanycountries.?Eurobondsareusuallyissuedinbearerform,payannualcoupons,maybeconvertible,mayhavevariablerates,andtypicallyhavefewprotectivecovenants.22InternationalStockMarkets?Inadditiontoissuingstocklocally,MNCscanalsoobtainfundsbyissuingstockininternationalmarkets.Thiswillenhancethefirm'simageandnamerecognition,anddiversifytheshareholderbase.Thestocksmayalsobemoreeasilydigested.?StockissuedintheU.S.bynon-U.S.firmsorgovernmentsarecalledYankeestockofferings.Non-U.S.FirmsmayalsoissueAmericandepositoryreceipts(ADRs),whicharecertificatesrepresentingbundlesofstock.ADRsarelessstrictlyregulated.23InternationalStockMarkets?Electroniccommunicationsnetworks(ECNs)havebeencreatedtomatchordersbetweenbuyersandsellersinrecentyears.?AsECNsbecomemorepopularovertime,theymayultimatelybemergedwithoneanotherorwithotherexchangestocreateasingleglobalstockexchange.24ComparisonofInternationalFinancialMarketsTheforeigncashflowmovementsofatypicalMNCcanbeclassifiedintofourcorporatefunctions:foreigntrade;directforeigninvestment;short-terminvestmentorfinancing;longer-termfinancing.Allofwhichgenerallyrequiretheuseoftheforeignexchangemarkets.*Foreigntrade.Exportsgenerateforeigncashinflowswhileimportsrequirecash25outflows.ComparisonofInternationalFinancialMarkets?Directforeigninvestment(DFI).Cashoutflowstoacquireforeignassetsbutgeneratefutureinflows.?Short-terminvestmentorfinancinginforeignsecurities,usuallyinEurocurrencymarket.*Longer-termfinancingintheEurocredit,Eurobond,orinternationalstockmarkets.26SummaryoftheCorporateUseofInternationalFinancialMarketsMNCscanuse?spotmarkettoexchangecurrenciesforimmediatedelivery;?forwardmarketorcurrencyfuturesmarkettolockintheexchangerateatwhichcurrencieswillbeexchangedatafuturepointintime;27SummaryoftheCorporateUseofInternationalFinancialMarkets?currencyoptionsmarkettolockinthemaximum(minimum)amounttobepaid(received)inafuturecurrencytransactionbutmaintainflexibilityintheeventoffavorableexchangeratemovements;?Eurocurrencymarketforshort-terminvestingorfinancing;?Eurocreditmarketformedium-termfinancing;?Eurobondmarketorinternationalstockmarketforlong-termfinancing.28QuestionsandApplications?Recently,Wal-MartestablishedtworetailoutletsinthecityofShanzen,China,whichhasapopulationof3.7million.Theseoutletsaremassiveandcontainproductspurchasedlocallyaswellasimports.AsWal-MartgeneratesearningsbeyondwhatitneedsinShanzen,itmayremitthoseearningsbacktotheUnitedStates.Wal-MartislikelytobuildadditionaloutletsinShanzenorinothercitiesinthefuture.29QuestionsandApplicationsa.ExplainhowtheWal-MartoutletsinChinawouldusethespotmarketinforeignexchange.b.ExplainhowWal-MartmightutilizetheEurocurrencymarketwhenitisestablishingotherWal-MartstoresinAsia.c.ExplainhowWal-MartcouldusetheEurobondmarkettofinancetheestablishmentofnewoutletsinforeignmarkets.30