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Overseas markets (indirect investment (multinational companies based in…
Overseas markets
indirect investment
multinational companies based in the home market
companies with a substantial export trade
collective investment schemes specialising in overseas investment
derivatives based on overseas assets
reasons for overseas investment
matching liabs in a foreign currency
diversification by country, economy, stock market, currency, industry, company, which serves to reduce portfolio risk
higher expected return
as compensation for higher risk involved
as a result of exploiting inefficiencies e.g. an undervalued stock, market or currency
advantages of investment in multinational companies
easier to deal in familiar home market
multinational companies will have expertise and tend to conduct their business in the most profitable areas overseas
gives access to areas where direct investment may be difficult
disadvantages of investment in multinational companies
overseas earnings diluted by domestic earnings
investor has no choice in where the company transacts its business
problems (MTV CATERPILLAR)