‘Scene 1: On December 2, 1991, a small Hong Kong (see Map 9.1) lending company, Global Vista Finance Co., quietly closes its doors. For months it had aggressively plunged most of its $7 million in borrowed money into the Hong Kong real-estate market, which is now collapsing. The next day, crowds of depositors begin...
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Introduction to Financial Markets for International Operations This hypothetical case is meant to demonstrate the interdependence of capital markets and industrial growth worldwide. It may seem farfetched to assume that events in Hong Kong could influence a steelworker’s job in Ohio, but stranger things have happened. Economic problems in Brazil and Mexico certainly have...
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LOCAL DEBT MARKETS As corporations expand across foreign frontiers, they must adjust to local debt markets, both short term and long term. Since each country has different business customs, firms need to abandon strict operating procedures developed in other countries. When Caterpillar Tractor went to Brazil for the first time, it was accustomed to...
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EUROCURRENCIES The Eurocurrency market is an important source of debt available to the MNE. A Eurocurrency is any currency that is banked outside of its country of origin. Eurodollars, which constitute a fairly consistent 65-80 percent of the market, are dollars banked outside of the United States. Dollars held by foreigners on deposit in...
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Eurocurrency Market Characteristics The Eurocurrency market has several interesting characteristics: 1. It is a wholesale rather than retail market, which means that transactions tend to be very large. Public borrowers such as governments, central banks, and public-sector corporations tend to borrow most of the funds. Also, nearly four fifths of the Eurodollar market is...
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