Foreign Investment in Local Securities

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Presentation transcript:

Foreign Investment in Local Securities By Sofian Haikal

FDI Portfolio Investment 1. Long term investment 1. Short term investment 2. Profit target (relatively low) 2. Profit target (very high) 3. Specific sectors (tourism, services … etc) 3. Through stock market or private equity 4. Needs clear regulations, investment law, tax, … etc 4. Securities law, settlement system, abide to international standards

FDI Portfolio Investment 5. Need long time stability Political – economic stability 5. Market depth, volatility, ability to exit without influencing the market at large. 6. Involvement in management 6. Usually investors are not involved in management (Special cases) 7. Difficult - long procedure 7. Relatively easy procedure 8. Local partners 8. Local Broker

Benefits of Portfolio Investment 1. Providing liquidity (Primary Market & Secondary Market) Syriatel case IPO Nov. 2004 7,000,000 Shares Ownership by Nationality Nov. 2007 67,000,000 Shares

Benefits of Portfolio investment Trading 2005 – 2007 8,530,356 Shares App. $115m

Benefits of Portfolio Investment 2. Incentive for local companies to go public. 3. Knowledge Transfer through management involvement. 4. Drive for more transparency, adapt international standards. 5. Efficient pricing for local securities. 6. Comparative analysis for the performance of local companies

Risk of Portfolio Investment 1. Aggressive Traders. 2. Not attached to any local company, criteria of holding depends only on companies’ performance. 3. Pressure for short term profits, against companies’ long term strategies. 4. The local market correlated with other markets in the regions.

Recommendations 1. Attract foreign investments in local securities under certain trading conditions. 2. Provide exit opportunities (trading mechanism, free money transfer). 3. Clear, flexible regulations that responds to the over changing needs of the market. 4. Market volatility.

Thank you