Source : Mobius on Emerging Market, 1998
In the current era of globalization, where economic barriers fade, shift the flow of funds from the surplus to the deficit will be more rapid and unimpeded. Capital market as the investment of fund flows from the excess wealth (surplus) to the cash-strapped (deficit) to act as financial intermediaries. Investors here is a party in relation to the financial surplus.
Who are the parties this surplus? In relation to the investment and use of funds, investors can be divided. First, is that domestic investors are investors who come from the country that make up the portfolio of assets in domestic capital markets. Both are foreign investors, ie investors who have some funds from abroad that make up a portfolio of assets in a number of different countries.
Foreign investment coming to other countries actually have a classic motif that includes, motive raw materials or natural resources, find new markets and minimize costs. From classical motifs are sometimes investors have other motives are motives to develop the technology. Investors are channeling their funds to other countries usually only carry one motive but can be due to several motives as well.
There are at least four ways investors can enter a country: Distressed asset investment, strategic investment, direct investment and portfolio investment. Distressed asset investment is an investment made to acquire ownership or purchase of debt of a company in financial difficulty. Second, the general strategic investment by foreign investors to acquire a company that has a wide enough market share and are in the business segment and location factors that support the company's expansion strategy investors. Third namely direct investment (direct investment) usually takes place in less developed sectors, such as technology-laden construction or development in the automotive sector, usually the company. Fourth is the investment portfolio is invested in bonds and stocks in the capital market.
Portfolio investment is what has been the concern of many practitioners in the field of capital markets. Why is that? Because this type of investor is the fastest moving exposures in a country if there is turmoil (political, economic, exchange rate) which is interpreted as uncertainty. They also are investors who have the most extensive selection compared to the above three types of investors. So that if certain events occur both at the macro, sekoral or government regulations, investors are more vulnerable and sensitive to the reflection on that information. The value of foreign investment in or out, practically will also affect the overall market due to the large volume of transactions.
The role of foreign capital in the country's development has long been discussed by experts in economic development. Broadly speaking, according Chereney and Carter firstly, external funding (foreign capital) can be exploited by emerging country as a base to accelerate investment and economic growth. Second, increased economic growth needs to be followed by changes in the structure of production and trade. Third, foreign capital can play an important role in the mobilization of funds and structural transformation. Fourth, the need for foreign capital to be dropped as soon as the structural changes actually happen (although foreign capital is more productive in the next period).Source : http://kumpulan-artikel-ekonomi.blogspot.com/2010/06/blog-post.html I have translated into English
