Module Study Guide

Academic Year 2017-2018

Full Title of Module:

International Trade, Finance and
Investment
Location: Alperton, Luton, Birmingham

London School of Science and Technology

(LSST)

Module Code:
MS6LS560
Level: 6
Credits: 20

Version No 1.0 © UWL 2017

 Executive Summary
A significant role is played by financial markets for the deployment long term investment of financial
resources for through financial mediation. The presence of money markets encourages short term
trading of debt instruments to meet short term needs of extensive fund users. We always have
individuals that have funds that they would prefer not to spend but instead put something aside for
future assistance. This arrangement of individuals to save since they have more than what they expected
to spend for their living. Like few other markets, the Financial Market is a particular market that is in
charge of directing financial resources from the surplus units (savers) to the deficit units (the individuals
who required extra support) to invest in their businesses. The Financial Market in this way constitute
every single financial organization that get financial resources from the surplus units of the economy as
reserve funds and exchange them to the shortfalls units by giving loans. At an exceptionally fundamental
level, the worldwide financial market joins savers to investors across national boundaries by offering
investors a huge range of investment on their products over an astonishing assortment of financial
markets. Financial market is comprised of the capital markets, products markets, and subsidiaries
markets. The development of the worldwide financial framework opens new doors for organizations and
governments to drive economic growth and development, and it increases access for new players,
notwithstanding growing opportunities for advancement.
Contents
Full Title of Module:..........................................................................................................................................1
International Trade, Finance and Investment.............................................................................................................1
Executive Summary.....................................................................................................................................2
Introduction & Background of Capital Markets:..........................................................................................4
Capital allocation within domestic economy:..............................................................................................4
Division of the Financial Market..............................................................................................................5
The Key Players in The Capital Market:....................................................................................................5
Capital allocation within international markets:..........................................................................................6
Evaluation of emerging economy................................................................................................................7
ECONOMIC AND SOCIAL ISSUES IN SOUTH KOREA..................................................................................7
Conclusion:..................................................................................................................................................9
Introduction & Background of Capital Markets:
A significant role is played by financial markets for the deployment long term investment of financial
resources for through financial mediation. The presence of money markets encourages short term
trading of debt instruments to meet short term needs of extensive fund users, for example,
governments, banks and similar organizations. Treasury bills of the Government and similar securities,
and commercial bills, are cases of the trade of such instruments in the capital market. An extensive
variety of financial organizations, including merchant banks, commercial banks, the national bank and
different merchants work in the capital market. Public and private segment operators influence
utilization of different financial instruments to raise to and contribute in short term finances which, if
require, can be immediately sold to fulfill short term needs. Dissimilar to the money market, the capital
market prepares long haul investments and value back for interests in long term resources. Capital
markets additionally help to reinforce corporate financial structure and enhance the general
dissolvability of the financial framework.

The securities section of the capital market supplements customary loaning establishments by giving
equity and debt. Through these instruments, the market can generate and utilize long term funds and
provide capital to investors to back long-term ventures in this way expanding horizon of resources.
Merchants in the securities segment of the capital market incorporate banking organizations,
stockbrokers, investment and merchant bankers and financial speculators who mediate between the
market and the general population.

Capital allocation within domestic economy:

We always have individuals that have funds that they would prefer not to spend but instead put
something aside for future assistance. This arrangement of individuals to save since they have more than
what they expected to spend for their living. Then again, there are individuals that need invest for
economic transactions yet don't have the required measure of finances. In spite of the fact that some do
have finance, it may not be sufficient to completely fund the planned venture. For example, an individual
might need to begin a little private business yet needs enough cash to back the business. Anyhow he/she
may require extra financial assistance to completely back his/her business. The Government for example
might want to develop a state of the art Hospital or build a smooth high way connecting Sierra Leone to
neighboring countries like Guinea and Liberia yet might not have enough finances to fund the project.
Subsequently, the Government may need to rapidly arrange finances through borrowing from the
general public. In another case, a college student might need to pay his/her school fees yet might not
have enough funding to do so and may look for finances. An organization may likewise need to
manufacture another industrial facility to expand its production inferable from the increasing demand
for its products however might not have extra supports to back the working of the plant. Along these
lines, organization might need to get to extra supports by taking an loans from somewhere.

Like few other markets, the Financial Market is a particular market that is in charge of directing financial
resources from the surplus units (savers) to the deficit units (the individuals who required extra support)
to invest in their businesses. The Financial Market in this way constitute every single financial
organization that get financial resources from the surplus units of the economy as reserve funds and
exchange them to the shortfalls units by giving loans. This part of transferring financial resources from
the surplus units to the shortfall units is what is alluded to as financial intermediation. In this manner, a
Financial Market contains all foundations that assume the part of financial intermediation. These
arrangements of organizations are consequently alluded to as financial intermediaries.

Division of the Financial Market

The Financial market is divided into two primary divisions, in particular (I) the Money Market, and (ii) the
Capital Market. The Money Market is not the same as the Capital Market as in, not at all like the Capital
Market, one can't raise long-term capital from the Money Market. The presence of money markets
encourages trading short term instruments to meet immediate needs of a large number of the
consumers of funds, for example, governments, banks and similar organizations. Government treasury
bills and similar securities, and also company commercial bills, are cases of instruments dealt in the
money market. An extensive variety of financial foundations, including merchant banks, commercial
banks, the national bank and different merchants work in the money market. Public and in addition
private organizations influence utilization of different financial instruments to raise short term financial
supports which, if requires be, can be immediately liquidated.

Not like the Money market, the Capital market is that constituent of the Financial Market that
encourages the activation of long-term venture capital for the financing of business enterprises and
Government long term investment ventures. At the end of the day, the term Capital Market alludes to a
particular financial organization that gives a channel to the acquiring and loaning of long term funds (i.e.
more than one year). It is an efficient financial establishment that encourages the transference of
financial resources from those that have surplus assets (savers) to those that required the utilization of
these assets (i.e. Government and private segment organizations) to commence long term venture. In
this way the Capital Market offers an open door for both private representatives and Government to
assemble tremendous measures of financial resources from the overall population through the offering
of financial securities.

The Capital Market is isolated into two territories; the Primary Market and the Secondary Market. The
Primary Market manages the trading of new securities. At the point when an organization issues security
for the first time (i.e. Initial public offering), they are traded in the Primary Market through the assistance
of issuing houses, Dealing/Brokerage Firms, Investment Bankers or potentially Underwriters. The
acronym IPO remains for Initial Public Offering, which implies the first run through an organization is
putting forth securities to the overall population for membership. The measure of cash brought up in the
Primary market goes specifically to the Issuing Company/Firm to fund its operations. Once the securities
(shares) of an organization are in the hands the overall population, they can be exchanged in the
Secondary Market to upgrade liquidity among holders of such financial securities. Accordingly, the
Secondary Market encourages the purchasing and offering of securities that are as of now in the hands
of the overall population (financial specialists). Here, the term speculator is utilized to allude to an
individual or an establishment that purchases the securities (Shares) of a Company with the aim of
making some financial returns. The Stock Exchange along these lines is a sorted out financial stage that
arrangements in exchanges including the purchasing and offering of financial securities in the Secondary
Market. To put it plainly, the Stock Exchange takes the necessary steps of a Secondary Market by
encouraging a formal exchanging course of action for financial securities.

The Key Players in The Capital Market:

The key players of an efficient Stock Exchange incorporate the Dealers/Stockbrokerage Firms, Company
Registrars, Issuing Houses, Mutual Fund Managers, Investment Bankers, the Stock Exchange, the Security
and Exchange Commission (which controls the exercises of the Exchange), the Central Security Clearing
and Settlement (CSCS) framework, the Investing Public, Accountants (Auditors) and Solicitors.

Capital allocation within international markets:

At an exceptionally fundamental level, the worldwide financial market joins savers to investors across
national boundaries by offering investors a huge range of investment on their products over an
astonishing assortment of financial markets. Financial market is comprised of the capital markets,
products markets, and subsidiaries markets. Following image (figure 1.1) shows the assortment of the
global financial markets:

Figure 1.1

The worldwide financial framework and the flows it facilitates influence worldwide monetary
development giving boundless advantages to people, organizations, and societies. Figure 2 demonstrates
the particular advantages.

Figure 2. How the Economic Growth is Promoted by Financial System:

worldwide trade flows are both substantial and developing. The financial framework facilitates global
trading different routes. Each assumes a part in the worldwide trading system . There are in addition
offshore instruments of money market like Eurodollars, which are a type of private money, as uninsured
deposits. The financial framework likewise encourages worldwide trade by method for allocating
liquidity from liquidity-surplus zones of the world to liquidity-starved zones. For instance, China's high
reserve funds rate prompted the aggregation of substantial liquidity deposits left after the nation's
investment needs were met amid the previous decade. This liquidity was utilized by the Chinese
government to purchase U .S . government debt instruments, to be specific Treasury bonds. This,
financed the debt of the U .S . government, which was utilized to meet the investment needs inside the
United States.

The global financial framework, through the production of money and money like claims and the
establishments that assist to manager and create with the flows of these claims, makes consistently
developing worldwide trade probable. This trade activates resources as in the specialized resources in a
country can be deployed to produce a product or service for another location, even when little or no
demand for that product or service exists in the country in which the resource is located.

The development of the worldwide financial framework opens new doors for organizations and
governments to drive economic growth and development, and it increases access for new players,
notwithstanding growing opportunities for advancement. Obviously, the advantages of the financial
framework can be experienced by a country that it is available to international financial flows, and the
more open the county, the more prominent the advantage.

Evaluation of emerging economy

Economic and Social Issues in South Korea

The Korean economy has difficulties as well as opportunities. China has turned out to be South Korea's
main partner in international trade and the most significant terminus of the foreign investments of South
Korea. Economic relationship among the nations of Northeast Asia is expanding. Besides, the Korea-US
Free Trade Agreement (FTA) could give huge energy to Korea to update its general financial framework.
Different FTAs may take place soon, in addition to the one with the European Union.

Then again, a few specialists in South Korea trust that their nation is sandwiched between the rapidly
developing and propelled nations—still trying to make up with the propelled economies, while being
pursued nearly by the growing ones (particularly China). They reason that due to militant labor union
and government regulation, the nation's global competitiveness is declining, and that South Korea is
confronting an emergency in innovation, profits, market domination, and cutting edge enterprises. As
large economies, for example, China and India are rapidly expanding and request develops for raw
materials and energy, procuring these necessities turns out to be more costly and troublesome in a
worldwide market. These circumstances show to a genuine threat to resource deprived countries, for
example, South Korea.

South Korea is additionally encountering issues regarding post-industrial socities, for example, a gap
between the rich and poor, social polarization, social welfare issues, and environmental debasement.
Another genuine challenge to the Korean economy is low fertility, just like a society that is aging will add
to a slackening of financial development.
The South Korean government anticipated financial extension of 3 percent in 2017, the speediest growth
since 3.3 percent seen in 2014. It sees an enhancing worldwide interest for South Korean products
supporting development & growth in the last two quarters of 2017, alongside expanded monetary
spending from the 11 trillion ($9.85 billion) in supplementary budget. The government sees an increase
in the exports with 10.2 percent this year, albeit private utilization is to grow at a slower 2.3 percent
expectedly because of waning job growth and record household debt.

"South Korea's potential growth rate is around 3 percent. As we noted earlier, posting 3 percent
expansion looks achievable assuming the economy continues to undertake reforms for consumption-led
growth," deputy finance minister Lee Chan-woo told an embargoed briefing.

South Korea's had inflated exports this year on account of a revival of the global demand, however local
consumption has slacked as a result of tepid wage growth.

Deputy finance minister Lee said the government would work to ensure the pace of spending growth
"stays higher than" the nation's nominal growth rate - which ignores inflation - currently estimated
between 4.5 percent and 5 percent. Government spending ascended at a normal rate of 4.8 percent in
annualized terms in the course of recent years, the ministry said. In the current economic conditions, the
ministry said the rate of the growth of exports could be moderate in the last two quarters of this current
year in view of debilitating oil prices.

The rapid growth of household debt is also considered as a threat to the economic growth of the
country, it included, as rising security yields. The government intends to fix borrowing rules to ensure
banks evaluate credit applications entirely and will urge borrowers to renegotiate their loans at a fixed
interest rate. Further, the ministry also said it will make arrangements with the Bank of Korea to ensure
the central bank's key loaning office for SME organizations.

Policies aimed to increase the female work force support and bringing down spending on private
schooling would likewise help. In the meantime, South Korea should work to enhance the investment
climate to raise the amount and nature of speculation, especially of SMEs in the administrations
business.

On the supply side, basic changes to animate optimum efficiency could, for instance, underline the
advancement of current government ventures, including service industries, training, media
communications, business handling, and legitimate money related administrations. Endeavors to ease
product regulations and lower hindrances to foreign investments would encourage competition and
technical development.

South Korea should likewise destroy the impediments that new companies confront. To this end, the
government must review inadequacies in the funding market, sustain the work power's abilities, and
energize business enterprise. It should also stand up to the huge, family-controlled chaebols –, for
example, Hyundai, LG, and Samsung – that contributed altogether to fast and rapid industrialization and
technological advancement yet in addition the block competition from new companies and SMEs,
smothering dynamism and development. Stricter rules are expected to enhance corporate
administration and forestall unreasonable practices by those associated with the chaebols.

South Korea is at a junction. In spite of the fact that President Moon Jae-in's government, which took
office in 2017, has divulged numerous monetary activities to encourage a "creative economy," their
impact so far has been insignificant. But his government still has three years to pursue reforms that
support the emergence of the services sector, start-ups, and SMEs as South Korea’s new growth engines,
capable of powering a more dynamic and innovative economy for the next 30 years.

Conclusion:

The Financial markets are playing a vital role in the economic development and growth of the countries.
The new technology has changed the grounds entirely and the world has now become as they say a
“global village”. Companies are operating in multiple countries and dealing with diverse workforce,
cultures, dynamics and demographics. At this point of time the allocation of resources in the
economically deprived countries is significant and the multinational companies help in doing so. Thus,
this not only aids the economic growth but since the market is global and interdependent an economic
downturn in one major country may affect the world globally resulting in a global recession. The overall
infrastructure of the financial markets helps the countries to develop and grow both internally and
externally in terms of strong economy and on the other hand help organizations as well as consumers to
improve their profits and living standards.