Foreign Securities - Business Finance - ثاني ثانوي

Link to digitato 4.5 Foreign Securities www.em.edu.sa Key Terms Depositary receipts (DRS) Eurobonds There are a vast number of securities in international markets. How investors access those securities depends upon the securities regulations in a country. For example, foreign securities cannot be listed on the Saudi Exchange. However, a Saudi citizen can purchase a Saudi developed mutual fund.or ETF that focuses on international equity markets. If a citizen of a country is able to transfer funds to foreign accounts and set up brokerage accounts in a foreign country, they can invest directly into that country. Brokerages can also have an international presence and can invest funds into foreign equities. Opusitary t Receipts issued for foreign securities held by a trustee 4.5a Depositary Receipts A security authority, like the Capital Market Authority (CMA), sets the rules for securities that can be exchanged in a country. While the CMA can place reporting and other requirements for companies in Saudi Arabia that list on the Saudi Exchange, they have little control over the regulation of companies outside of Saudi Arabia. Investment banks and companies can set up depositary receipts (DRs). These are receipts issued for foreign securities held by a trustee. The DR represents ownership of shares in a foreign market and can be purchased as an investment. 166Business Finance 4.5b International Bonds In addition to stocks, bonds sold in foreign countries are purchased internationally. There are three general types: (1) bonds issued by foreign firms; (2) bonds issued by foreign governments; and (3) bonds issued in foreign countries by international firms. Bonds issued by firms internationally depend on the currency in which they are denominated. A firm can sell bonds abroad denominated in the foreign currency or the firm can sell bonds denominated

in the home currency (for example, Saudi SAR). These are called Eurobonds but this is not related to Europe. When a Saudi Arabian firm issues a Eurobond, it promises to make payments in SAR. In this case, a Saudi investor will not have to convert the payments from the country currency where the bonds are issued (such as British pounds) back into SAR. Emuhunde Bonds sold in a foreign country but denominated in the currency of the issuing firm Exercises Choose the correct answer. 1. Which of the following are true of depositary receipts (DR): a. Investment banks and companies can set up depositary receipts (DR). b. DRs are denominated negotiable instruments issued by a depositary bank in the local currency. c. A DR represents ownership of shares in a foreign market and can be purchased as an investment. d. All are true. 2. A bond sold in a foreign country but denominated in the currency of the issuing firm is called a(n): a. Exchange bond. b. Transnational bond. c. Eurobond. d. Savings Eurobond. وزارة التعليم CHAPTER 4 An Introduction to Financial Markets 167