Chap011 - 11 Chapter The Global Capital Market Case China...

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Chapter The Global Capital Market 11
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Case: China Mobile Largest provider of wireless telephone service in the world In 2000 China was wrapping up negotiations to join the World Trade organization Direct consequence: China will have to open up its telecommunication market to foreign service providers As a preemptive strategy China mobile Increased geographic coverage Raised capital through Issuance of new shares Selling 2% stake in company to Vodafone Selling ADRs
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Functions of a generic capital market Brings together: Those who want to invest: Corporations, individuals, non bank financial institutions Those who want to borrow: Individuals, companies, governments Market makers: Commercial and investment banks that connect investors with borrowers
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The main players in a generic capital market Fig 11.1
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Attractions of the global capital market Increases the supply of funds available Benefits both borrowers and investors Borrower’s perspective Lowers the cost of capital Investor’s perspective Provides a wider range of investment opportunities
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Market liquidity and the cost of capital Fig 11.2
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Risk reduction through portfolio diversification Fig 11.3
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