552 Part 6 Working Capital Management, Forecasting, and Multinational Financial Management
which is a U.S. dollar deposited in a bank outside the United States. Today
Eurocredits exist for most major trading currencies.
The second type of market is the Eurobond market. A eurobond is an interna-
tional bond underwritten by an international bank and sold to investors in coun-
tries other than the one in whose currency the bond is denominated. Thus, U.S.
dollar-denominated eurobonds are not sold in the United States, pound eurobonds
are not sold in the United Kingdom, and yen eurobonds are not sold in Japan.
These bonds are true international debt instruments and are usually issued in
bearer form, which means that the owner’s identity is not registered and thus is
not known. To receive interest payments, the owner must clip a coupon and pres-
ent it for payment at one of the designated payor banks. Most eurobonds are not
rated by the rating agencies such as S&P and Moody’s, although a number of
eurobonds are starting to be rated. Eurobonds can be issued with either a! xed-
coupon rate or a " oating-rate coupon depending on the preferences of the issuer,
and they have medium- or long-term maturities.
The third type of market is the foreign bond market. Foreign bonds are issued
in the country in whose currency the bond is denominated, and they are under-
written by investment banks in that country. However, the borrower is headquar-
tered in a different country. For instance, a Canadian company might issue a U.S.
dollar-denominated bond in New York to fund its U.S. operations. Foreign bonds
issued in the United States are sometimes called “Yankee bonds.” Similarly,Eurobond
An international bond
underwritten by an
international syndicate
of banks and sold to
investors in countries
other than the one in
whose money unit the
bond is denominated.Eurobond
An international bond
underwritten by an
international syndicate
of banks and sold to
investors in countries
other than the one in
whose money unit the
bond is denominated.Foreign Bond
A type of international
bond issued in the
domestic capital market
of the country in whose
currency the bond is
denominated and
underwritten by
investment banks from
the same country.Foreign Bond
A type of international
bond issued in the
domestic capital market
of the country in whose
currency the bond is
denominated and
underwritten by
investment banks from
the same country.In Chapter 2, we described the major U.S. stock market indi-
ces. As discussed herein, similar market indices also exist for
each major world " nancial center. The accompanying " gure
compares four of these indices (Japan, Germany, Great Britain,
and India) against the U.S. Dow Jones Industrial Average.Hong Kong
In Hong Kong, the primary stock index is the Hang Seng. Cre-
ated by HSI Services Limited, the Hang Seng index re! ects
the performance of the Hong Kong stock market. It is com-
prised of 33 domestic stocks (accounting for about 70% of
the market’s capitalization), which are divided into four sub-
indices: Commerce and Industry, Finance, Utilities, and
Properties.Germany
The major indicator of the German stock market, the XETRA
DAX, is comprised of 30 German blue chip stocks. These
stocks are listed on the Frankfurt exchange, and they are
representative of the industrial structure of the German
economy.Great Britain
The FT-SE 100 Index (pronounced “footsie”) is the most
widely followed indicator of equity investments in Great
Britain. It is a value-weighted index comprised of the 100 largest
companies on the London Stock Exchange, and its value is
calculated every minute during the trading session.Japan
In Japan, the principal barometer of stock performance is the
Nikkei 225 Index. The index’s value, which is calculated every
minute throughout daily trading, consists of a collection of
highly liquid equity issues thought to be representative of
the Japanese economy.Chile
The Santiago Stock Exchange has three main share indices:
the General Stock Price Index (IGPA), the Selective Stock Price
Index (IPSA), and the INTER-10 Index. The IPSA, which re! ects
the price variations of the most active stocks, is comprised of
40 of the most actively traded stocks on the exchange.India
Of the 22 stock exchanges in India, the Bombay Stock
Exchange (BSE) is the largest, with more than 6,000 listed
stocks and approximately two-thirds of the country’s total
trading volume. Established in 1875, the exchange is also the
oldest in Asia. Its yardstick is the BSE Sensex, an index of
30 publicly traded Indian stocks that account for one-" fth of
the BSE’s market capitalization.Spain
In Spain, the IBEX 35 is the o& cial index for measuring equity
market performance. This index is comprised of the 35 most
actively traded securities on the Joint Stock Exchange Sys-
tem (comprising the four Spanish stock exchanges).STOCK MARKET INDICES AROUND THE WORLD