Business Finance Homework Help

About the Research PaperWorking, it needs to conduct an in-depth country analysis of an emerging market economy to determine its suitability for foreign direct investment (FDI) as a multinational corporation’s (MNC) global financial strategy. Opportunities for arbitrage and portfolio investments should also be researched and discussed.

Additionally, there should be projected costs of the FDI in the host country’s currency translated into its U.S. dollar equivalent, with an estimated price and demand schedule for the next 3 years. The appropriate hedging instruments to mitigate potential exposure to FX, economic and translation risks should also be discussed. . The purpose of the research assignment is to demonstrate understanding of the relationship between the dynamics of profitability and global financial strategy in a multinational setting.

MNC: Public Storage, Inc.

Host Country: Indonesia

Economic Risk:

• Size of External Debt: What is the size of the external debt and the related interest payments (debt service)? If a country has a large stock of external debt, its monthly debt service may be burdensome to the point where the government might not be able to provide basic social services, and education to its citizens, because most of its revenue would be spent on servicing external debt. How would high debt service affect FDIs?
• Structure of the Current Account: What is the trade balance of your adopted country? Does it have a trade surplus, or trade deficit, and if so, why? What are the implications of a trade surplus or deficit on FDIs?
• Capital Controls and Repatriation of Profits: Research and discuss if the host country has policy on blocked funds (capital controls) past and present that could affect repatriation of profits by the MNC to its home country.
• Resource Endowment, Level of Development and Economic Diversification: What natural resources does the country have, that it can export to earn hard currencies? And what is its level of development as classified by the World Bank (low-income, middle income, or an upper income economy), and how diversified is its economy? What are the implications of these factors on FDI?
• Size and Composition of Savings and Investment: This section is referring to household savings rate in the country. Why is savings rate of interest to an MNC considering FDI in the host country?
• Rate and Pattern of Economic Growth: What is the current GDP growth rate for the country? Has the GDP growth rate been consistent over the years, or it changes from time to time? If so, why? Why is GDP growth rate of interest to an MNC considering FDI in the host country?
• Effectiveness of Fiscal and Monetary Policies: How effective is the tax and expenditure policies (fiscal policy) of the country? And how about its monetary policy that may focus on money supply levels and inflation targeting as the key instruments for monetary policy management? Inflation targeting is the exclusive use of interest rates to control inflation. Why are fiscal and monetary policies of interest to an MNC considering FDI in the host country?
• Structural Economic Reforms: Privatization (selling government owned companies to private investors) and liberalization of the economy are examples of structural reforms. Why are structural economic reforms of interest to an MNC considering FDI in the host country?
• Long-Term Economic Projections: What is the country’s central bank and the International Monetary Fund saying (forecast) about the future GDP growth of the country? Why are long-term economic projections of interest to an MNC considering FDI in the host country?
• Economic Risk Hedging Strategies: Research and discuss “applicable” hedging strategies for mitigating economic risks.

Thoroughly evaluates country data to identify and describe 8-6 credible sources of economic risks that are explained (not listings) with implications on the ten areas outlined in the table of contents for, or against FDI in the host country.

Arbitrage and Portfolio Investment Opportunities:

To maximize shareholder value, MNCs do explore other global financial strategies in the host country such as arbitrage and portfolio investments. Conduct research and describe in detail such opportunities in the host country (see the link below on the different types of arbitrage). You should also research and discuss the risks involved in arbitrage trading and portfolio investments, including risks mitigation strategies.

https://financeplusinsurance.com/different-types-arbitrage-trading-strategies/.

And there is an article on international portfolio investments as a material uploaded.

Thoroughly evaluates country data to identify and describe 14-12 credible sources of risks that are explained (not listings) for arbitrage and portfolio investment opportunities including risk mitigation strategies.

The lists of Resources can be used:

• CNBC News

• International Monetary Fund (Balance of Payment data and Consultative Agreements between the host country and the IMF)

• International Finance Corporation

• Asian Development Bank

• African Development Bank

• European Bank for Reconstruction and Development

• Bank of International Settlements

• Inter-American Development Bank

• U.S. International Development Finance Corporation

• U.S. Export-Import Bank

• Bloomberg News

• The INSEAD Emerging Markets Institute

• The Emerging Markets Institute at the Samuel Curtis College of Business at Cornell University

• Wall Street Journal

• Yahoo Finance

• Annual Reports of Host Country Central Bank (websites obtained through bis.org)

• CIA World Factbook

• The Economist Magazine

• The Financial Times

• New York Times

• World Economic Forum

• MSCI Emerging Markets Index or MSCI Frontier Markets Index

• The Goldman Sachs Emerging Markets Equity Index

• World Bank Country Classification (wcph2020.com)