What are the components of the capital market
Euro capital market
1993 1994 1995
Shares 40.7 45.0 41.0
Bonds 818.6 967.6 1284.3
Total 859.3 1,012.6 1,325.3
Source: Financial Market Trends, Issue 64, June 1996
Euro ? Capital market 1993? 1995 Issue volume in billion US $
The bonds are predominantly denominated in US dollars. In addition, bonds are mainly found in sterling, yen, SFR, DM and indexed in ECU or SDR.
Euro equities are also increasingly being financed through this market. Since 1983 this market has grown in importance in relation to the euro credit market.
The euro capital market is a sub-market of the euro markets. It is an international market for medium to long-term investments in euro bonds and euro stocks in euro currencies.
Market for euro bonds in dollars, € and other convertible currencies (convertibility), which are usually issued by international banking consortia and are offered for subscription in one or more countries. Also known as the euro bond market.
In contrast to the euro money market (euro credit), the euro capital market is less interesting for international trade, unless direct investments abroad are to be financed there on a long-term basis. It is an international capital market on which medium and long-term loans (also limited participation by national and international companies and institutions) are granted by international issuing consortia in one or more currencies at financial centers outside the country of origin. Mostly euro bonds are traded. The euro capital market is also used for export and import financing. The market is subject to its own interest structure, regardless of the policy of the respective national central bank. The euro money market serves v. a .: - for the refinancing of foreign trade transactions - the short-term money market business of the banks - the international liquidity equalization. Euro money market transactions are generally processed without collateral and, if necessary, informally. If the creditworthiness and standing of a borrower are insufficient, banks provide a guarantee. Negative declarations or letters of comfort from subsidiaries of multinational corporations can also be found in international companies (foreign trade, institutional). Short-term euro credit options are: - overnight money, without collateral and informally, i. d. Usually a maximum of 1 month (especially under banks); - Fixed deposit, 1 month to 1.5 years; - Cancellation fee with notice periods of 1 to 7 days. The fixed-term deposit is used to refinance foreign trade transactions, for example for the duration of the supplier credit (follow-up financing), combined with a foreign exchange transaction. A euro loan is advantageous for an exporter if a supplier credit has been granted in a foreign currency and he wants to combine the exchange risk with the refinancing of his follow-up financing. A euro loan is taken out via the house bank, whereby the granted foreign currency loan is then converted to the spot exchange rate and the forward transaction becomes a cash transaction. The repayment of the euro loan takes place after receipt of payment in the foreign currency. There is no forward exchange transaction. For the importer, the euro credit is advantageous when invoicing in a soft currency, if he can process the import business in cash and can repay the euro credit from the subsequent sale proceeds in hard currency (e.g. EUR) at a more favorable exchange rate. Medium-term euro credit options are: - Roll-over credits with a fixed term of up to 4 years, which are refinanced from short-term deposits. The bank bears the credit risk and the borrower bears the interest rate risk. Fixed-rate contracts are possible. - Medium-term syndicated loans from euro banks for larger loan volumes. - Certificates of Deposits (CD) for capital investment are medium-term securities issued by banks in London. There is an increased risk associated with these euro transactions in currency forwards, v. a. when the banks carry out maturity transformations. The euro credit chain ends when the last holder of the claim calls up the sight balance at the bank for payment purposes and is therefore no longer available to any Eurobank.
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