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The Global Trade and Investment Environment

The document discusses global trade and investment patterns. It examines trends showing rising exports and imports as a share of GDP, with Europe having strong trade between small countries. The US has a large internal market. World export trends show most growth in developing countries. Foreign direct investment occurs when firms invest in new facilities abroad. Governments can encourage or discourage foreign direct investment through various policies. There are risks and returns associated with different global investment options that must be considered.

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Carlo Niño Gedoria
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169 views21 pages

The Global Trade and Investment Environment

The document discusses global trade and investment patterns. It examines trends showing rising exports and imports as a share of GDP, with Europe having strong trade between small countries. The US has a large internal market. World export trends show most growth in developing countries. Foreign direct investment occurs when firms invest in new facilities abroad. Governments can encourage or discourage foreign direct investment through various policies. There are risks and returns associated with different global investment options that must be considered.

Uploaded by

Carlo Niño Gedoria
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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The Global Trade and

Investment Environm
ent
Presented by:
Mr. Carlo Nino Gedoria
MBA 2-E
University of Caloocan City
International Trade Patterns
• Describing the evolving pattern of international
commerce
• Documenting the emerging markets for global
exports
• Examination of global trade flows in six major
commodity groups
World Patterns of Trade (1)

A clear trend
towards
rising
exports/imports
as a share of
output (GDP)
World Patterns of Trade (2)
Europe – many
small countries
with strong
trade to other
small countries,
somewhat like
trade among
U.S. states

US –ipsum
Lorem a hugedolor
internal market
sit amet, consectetur adipisicing elit.
World Export Trends

Lorem ipsum dolor sit amet, consectetur adipisicing elit.


One year change
Is very short,
But the total
Change (8%)
Seems low
Given the
Data for
Individual
industries
Foreign direct investment (FDI)

It occurs when a firm invests directly in new facilities to


produce and/or market in a foreign country. Once a firm
undertakes FDI it becomes a multinational enterprise
There are two forms of FDI
• A greenfield investment (the establishment of a
wholly new operation in a foreign country)
• Acquisition or merging with an existing firm in
the foreign country
Foreign Direct Investment
in the World Economy
There are two ways to look at FDI
The flow of FDI refers to the amount of FDI undertaken
over a given time period
The stock of FDI refers to the total accumulated value of
foreign-owned assets at a given time

Outflows of FDI are the flows of FDI out of a country

Inflows of FDI are the flows of FDI into a country


Government Policy Investments and FDI

FDI can be regulated by both home and host countries

Governments can implement policies to


1. encourage FDI
2. discourage FDI
Government Policy Investments and FDI

A host government’s attitude toward FDI is an important in


decisions about where to locate foreign production facilities
and where to make a foreign direct investment

A firm’s bargaining power with the host government is


highest when
• the host government places a high value on what the
firm has to offer
• when there are few comparable alternatives available
• when the firm has a long time to negotiate
Host Country Costs

There are three main costs of inward FDI

1. the possible adverse effects of FDI on competition


within the host nation
2. adverse effects on the balance of payments
3. the perceived loss of national sovereignty and
autonomy
Home Country Benefits

The benefits of FDI to the home country include

1. the effect on the capital account of the home country’s


balance of payments from the inward flow of foreign
earnings
2. the employment effects that arise from outward FDI
3. the gains from learning valuable skills from foreign
markets that can subsequently be transferred back to
the home country
Selecting Investment
in Global Market
Global Investment
- a term that is used to refer to a strategy of investment
that is not constrained by geographical location.

6 Ways to Invest in Foreign Stocks


• American Depository Receipts (ADRs)
• Global Depository Receipts (GDRs)
• Foreign Direct Investing.
• Global Mutual Funds.
• Exchange-Traded Funds (ETFs)
• Multinational Corporations (MNCs)
Global Investment Choices
• Fixed-income investments
- bonds and preferred stocks
• Equity investments
• Special equity instruments
- warrants and options
• Futures contracts
• Investment companies
• Real assets
Risk – Returns on Alternative Investments
LTV - Loan To Value ratio

The is the ratio of a loan to the value of the financed asset.


(e.g., a $5M loan taken out on an asset valued at $20M will
have a 5/20, or 25% LTV) When a loan for an amount is at or
near the appraised value of an asset, the loan-to-value ratio is
deemed high. If a creditor ever has to sell the asset to recoup
the investment, as in the case of default or foreclosure, high
LTV ratios carry an increased likelihood that the sale amount
may not be enough to cover the outstanding principal loan
balance.
Risk – Returns on Alternative Investments
Default risk

Default risk is the risk that the borrower will not be able to repay
the associated interest and principal on a particular loan.
Essentially all lending carries some default risk, but there are a
few ways to try and mitigate default risk. A traditional way is to
look at the recovery rate, or the amount an investor can expect
to get back if a default happens.
Risk – Returns on Alternative Investments
Concentration risk vs. diversification risk
The easiest way to explain concentration risk/diversification risk is the
old saying, “Don’t put all your eggs in one basket.” There are many
ways to be exposed to concentration risk. Investing all resources in the
same industry, geographical region, or type of investment instrument
(eg. only investing in coastline construction) could carry
concentration risk.

The best way to counteract this type of risk is to aim for a diversified
investment strategy by putting investments in different “baskets”. Most
individual investments are packaged into portfolios that are diversified
geographically (in the case of real estate), across case types (in
litigation funding), and in other ways.
Risk – Returns on Alternative Investments
Frequency of payments
Payment frequency on a debt can be annual, semi-annual, quarterly, or
monthly. The frequency of a payment can affect the price or yield
(return) of an investment. For alternative investments that are closely
tied to assets, unexpected increases (for example, early repayment) in
the frequency of payments can reduce the return to the lender on the
investment. Higher expected returns are used to reward investors who
are willing to take on more risk. Returns on invested capital are,
however, never guaranteed. It is crucial to carefully weigh all the
different risks that come with an investment and to understand your
appetite for risk before making any sort of investment.
Global Trade, the Pandemic, and Multilateral Directions
• Title of caselet:
Analyzing the impacts of global trade and investment on non-communi
cable diseases and risk factors: a critical review of methodological app
roaches used in quantitative analyses

• http://sdg.iisd.org/commentary/policy-briefs/global-trade-the-pandemic-an
d-multilateral-directions/
Thank you & Godbles
s😊

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