International Trade Finance And Investment

This report focuses on the evaluation of the capital markets which will ultimately help in allocating the capital in a domestic economy along with the element of international trade, investment & purposes of development. In addition to this, critical evaluation of the economy of Australia is done to understand the key challenges that are faced by the economy to deal with industrialization and the trade policies.

International Trade
Finance And
Investment

Table of Contents
International Trade Finance And Investment..................................................................................1
Executive Summary.........................................................................................................................3
Background Of The Financial Markets............................................................................................3
Financial markets of United Kingdom........................................................................................4
Capital Allocation within Domestic Economy................................................................................4
Capital Allocation Within The International Trade.........................................................................6
Foreign Direct Investment...........................................................................................................7
Foreign Bonds ............................................................................................................................7
Foreign Exchange........................................................................................................................7
Evaluation Of Emerging Markets of Australia................................................................................8
Critical evaluation of challenges that country faces due to industrialization and trade policies.....9
Conclusion.....................................................................................................................................10

Executive Summary
International trade finance can be considered as an important and essential component
that helps in providing certain kind of financial help through the banks and the financial
institutes. This is done majorly in the field of international trade that basically utilize various
financial instruments namely bank guarantee, letter of credit and many more. It is considered that
all the financial instruments mainly assists the importers & the exporters so that they can
implement the business transaction without any kind of financial hindrance which may affect the
business related activities. Also, the major role played the international trade finance is that it
helps in bridging the gap between the importers and the exporters by using the third party to
successfully execute the business transactions. The report will e further focusing on the
evaluation of the capital markets which will ultimately help in allocating the capital in a
domestic economy along with the element of international trade, investment & purposes of
development. In addition to this, critical evaluation of the economy of Australia is done to
understand the key challenges that are faced by the economy to deal with industrialization ad the
trade policies.
Background Of The Financial Markets
Financial markets can be defined as the marketplace that helps in the trading of the
financial securities that majorly includes the stock markets, bond markets and many other. In
order to fulfil the motive of the smooth functioning of the capitalist economy financial markets
are highly considered as the vital component (Zhan and de Jong, 2018). It majorly assists the
firms for the purpose of allocating resources and creating the sense of liquidity for the business
organizations and the entrepreneurs. The financial market make it easy for the both the parties
namely buyers and the sellers in order to trade with the financial holdings. The financial markets
exists in different forms namely stock markets, money markets, over the counter markets, bond
markets, derivative markets, foreign exchange markets and commodities markets.
Cryptocurrency are considered as the latest trends in the field of the financial markets which is
becoming popular day by day. These tools helps in providing the international finance and
investment opportunities in order to bring high level of efficiency in regular operations of the

several business entities. Financial markets covers many functions that are helps in capital
allocation of the capital and the assets of the financial economy. Without the financial markets it
becomes difficult to allocate the capital in an effective and efficient way for the purpose of
various economical activities namely commerce and trade, growth opportunities.
Financial markets of United Kingdom
The United Kingdom is considered as the home to one of the oldest and most effectively
developed financial markets around the world, in accordance to London which is being
considered as one of the three major ‘command centres’ of the international economy. While the
UK is considered as the sixth largest economy in the world in context to nominal GDP, it is also
ranked third in terms of the total share of international markets of equity with the country which
is behind U.S. and Japan (Aggarwal ed., 2019). The country is also having the world’s largest
foreign exchange (forex) market, and is also one of the biggest derivatives market for the
purpose of off-exchange derivatives. As, the United Kingdom is considered as the world most
dynamic and innovative centre of financial markets, many of the overseas institutions along with
the investors choose the financial markets of United Kingdom to operate. There are various
financial market activities that are being performed in UK markets namely fund management,
wealth management, international banking, investment products, derivatives, insurance.
Therefore, it can be considered that these financial instruments in the markets of finance are
helping many people to deal with the financial transaction in an effective terms.
Capital Allocation within Domestic Economy
It can be defined as the technique or a process that helps in ascertaining the highly
effective investment strategy in order to strategize the for the maintenance of the organizational
financial resources. This ultimately results in the attainment of the goal maximization of the
shareholders equity considerably. There are many ways through which the capital can be
allocated in effective and the efficient terms which may result in achieving te higher level of
growth of the company (Kleinberg, 2019). Therefore, Some of the options for the purpose of
allocating capital could help in including the returning cash to shareholders through dividends,
repurchasing shares of stock, issuing a special amount of dividend, or increasing a higher level of
research and development (R&D) budget. Alternatively, the company can also opt majorly to
invest in growth related initiatives, which majorly includes acquisitions integrated disbursement.

Capital markets within the domestic economy are considered as the vital source of stable,
sustainable financial management and support the private sector which are associated with the
employment and economic growth. Yet capital markets are considered as underdeveloped across
the emerging competitive markets, leading to unstable liquidity situation, elevated transactional
costs, and other types of inefficiencies (Poursoleiman, Mansourfar and Abidin, 2020).
Development banks can play an important to help in fostering a stronger capital market through
local bond issuances, partial level of credit guarantees, anchored investments, risk sharing and
securitization assistance. Capital markets in domestic economy play an important role in the
mobilization of the private capital to finance domestic improvement. By providing companies
the ability to enable them to borrow certain level of amounts domestically in local currencies,
domestic capital markets can assist to reduce the mismatches in the currency for the borrowers,
thus it helps in reducing systemic risks (Loxley, 2019). Profound and cost-efficient domestic
capital markets can help in addressing these issues in accordance with simultaneously assisting
to justify the impact of flow of the capital volatility that will ultimately help in reducing the
reliance of the country on foreign debt, and majorly increasing the resilience in order to deal with
the economic and banking system crises efficiently. Therefore, developed capital markets also
allows the local institutional investors mainly the pension funds and insurance companies to have
an access on the long-term investment sources of finances other than that of the government debt
along with the cash deposits. In addition to this, they helps in better the quality and repercussion
of financial intervention in a particular economy, particularly in case of the economies with
inefficient banking systems. It helps in addressing the infrastructural shortfall and bottlenecks by
pulling together the local currency funds in terms that the better and effective mirror
infrastructure project of the cash flows can be compared to the shorter-term traditional bank
credits.
In context to United Kingdom, the major sources of primary allocation of the capital is in
the case of the federal and local government and corporations. Therefore, in order to understand
the concept of the capital allocation in consideration to United Kingdom, it is highly important to
understand the meaning of capital markets as well as the money markets.
 Capital markets: It is a market in which the buyers and the sellers are engaged in the
trading of the financial securities namely bods, stocks etc. Therefore, the buying and
selling is performed by different parties or the participants namely the individuals and the

institutions (Danish and Wang, 2018). The major role that the capital markets play is to
channelise the surplus funds from the different investors to the institutions which then are
responsible to invest them for a productive utilization purpose.
 Money Markets: it can be defined as the market that is made for the trading of the short
term debt investments in an efficient manner. It also involves the large level of
transactions at a wholesale level as well (Akhtar and Das, 2019). There are various
instruments that are required for the execution of the functioning of the money markets in
a smooth manner. At the level of retail, it majorly includes mutual funds which can be
bought by the individual investors as well as the accounts of the money market which is
opened by the potential customers.
The Major Effect Of Interest Rates On The Allocation Of Capital Within The UK
The domestic economy of United Kingdom, the interest rates on all the saving products
which are having the cash nature have seen the downfall over the period of last 5 years. This
happened because of the low interest rate in the Bank of England, which disclosed a downfall in
past years.
Capital Allocation Within The International Trade
International capital markets can be considered as an important and vital component of
the financial market where the shares, bonds, debentures and many more that are purchased and
sold in the financial markets. International Capital markets are classified as the group of different
country's capital market. There are different components that are considered in the international
trade in consideration to the capital allocation of the financial funds. They are elaborated below
in consideration to the economy of United Kingdom underneath:
Foreign Direct Investment
Foreign direct investment can be defined as the one of the effective form of controlling
the ownership in a business organization in particular one country through an entity based in a
different country. FDI includes all the investment of minimum 10% of the equity capital of a non
resident firm (Hill, 2020). It is basically the direct capital that has been used to create various
building, machinery and the equipments which are not syncing with the portfolio investment . It
is also including the different types of acquisition activities rather than the investing firms home
country. Foreign direct investment is an extremely important tool that focuses on the externally

derived finance that is offered to the countries along with the limited amount of capital which
gets financed with the help of the wealthier countries. Also, according to World Bank, Foreign
Direct Investment is considered as the one of the most critical elements that basically helps in
developing the private sector in case of the lower income economies. In addition to this the level
of poverty have also been reduced considerably.
International Money Markets
The international money markets can be defined as the markets that helps in running the
transactions between the various central banks of the countries (Cannizzaro and Weiner, Sato
and Shimizu, 2018). The process of trading in terms of country's currency with the another one is
also considered as the Forex Trading.
Foreign Bonds
These are the bonds that are issued by the foreign company in a domestic market for the
purpose of raising finance through the capital. For the purpose of supervising the issuance and
the sale of the bonds local market authorities are considered a responsible for the purpose of
effective execution of the sale and purchase of the foreign bonds. The main issuers of the bonds
are government as well as the private sector.
Foreign Exchange
It can be considered as the trading of the currency with the another one. It plays certain
kind of critical role in developing and executing the international trade, investment and all types
of financial transactions. The forex markets play an important role in making the financial
transaction in terms of the foreign currencies that helps in converting the currency that re
required.
Evaluation Of Emerging Markets of Australia
Australia is considered as a huge economy among the world's top economies. As per the
international monetary funds, Australia is all set to to become the 12th largest economy. Despite
various challenges Australian economy has achieved an exceptional performance. The resources,
energy and the agricultural exports of the country were growing on a rapid rate showing a higher
level of efficiency in the business international operations . The country has also focussed on the
public health as well as the lock down measures that have helped the economy to minimize the

spread of the virus from the country (Wallace, 2021). In addition to this the economy of
Australia has been highly strong which portrayed an effective and efficient performance of the
economy on various grounds namely finance, technical, legal and many more. This ultimately
helped the economy of Australia to grow considerably with a greater level of development.
Disadvantages
There are various disadvantages in the economy of Australia is considered. The one of
the biggest disadvantage of Australia is that it is highly overpriced city that is having a high
amount of living expenses which becomes a hindrance for the population to survive at a smooth
level. Also, it has been seen that the housing cost of Australia is also very high which states that
the market of housing in Australia is overpriced significantly. Because of the high amount of
spending on the residential property development there results have shown that the Australia's
housing interest is slowly deflating considerably.
In terms of international trade and investment, there are several opportunities for
Australians in order to expand their business organization (Vidales and García-Pérez, 2019).
Trade agreements can improve access to the markets across all sectors of trading of goods,
services and investment and help to maintain the impact of the competitiveness of Australian
firms.
Advantages:
The quality of living in the Australian economy is considerably high showing that the
country is a beautiful place to live in for a major number of people. This will help the people to
increase the level of the per capita income considerably.
International trade and investment is critically significant to the Australian economy
which is constantly providing jobs and prosperity to people who are potentially capable.
International trade and investment opens up several opportunities for the people in order to
expand their business organizations (Chen and Kieschnick, 2018). Trade agreements is also
playing an important role in improve the access to the market across all sectors of the trade
namely goods, services and investment and also assists in order to deal and stimulate with the
high level of competitiveness of the Australian firms. This helps in benefiting the Australian
consumers through an access to an increased range of variety of effectively better-value goods
and services.

Critical evaluation of challenges that country faces due to industrialization
and trade policies.
For the purpose of conducting the evaluation, it is highly necessary that challenges need to be
considered which are responsible for posing challenges on the industrialization and the trade
policies of Australia. The challenges are mentioned below along with the elaboration:
 Slow Economic Growth: The rate of growth of the Australian economy has been
slowing down considerably which is showing a higher level of inefficiency. However,
the major problem that the Australia is currently facing is rapidly increasing population
(Song, Yu and Lu, 2018). This is the explanation why Australian nationals have become
interested for immigration.
 Job growth rate: It is one of the biggest challenge for the Australian economy as well as
the government to deal with. There are more number of workers present while on the
other hand the number of jobs available are not even close to the number or workers
available to work. It can also be considered that the Australian middle class has been
stuck at a wage rate which is stagnant have created a huge impact on the development on
the quality of living standards of the people considerably.
 Reliability on the natural resources: One of the most significant problem that the
Australian economy is facing is that it is largely dependent on the natural resources. The
growth of the economy is mainly driven only because of the natural resources. Australia
is considered as the largest exporter of coal which is an important natural resource. While
there is a limit to the number of years which an economy can depend on the natural
resources like coal because a higher level of dependence on them can result into the
depletion of the natural resources and the rate of development will fall down in the
consecutive years considerably. Therefore, the economy of Australia must give
consideration towards finding some other alternative for the replacement of the use of
coal.

Conclusion
From the above report, it can be concluded that international trade finance and investment
is considered as an important component of any economy to deal with the latest impacts of the
certain occurrences financial crisis. Also, the allocation of the capital in the domestic as well as
the international markets must be done effectively in order to build a strong economy on the
basis of global financial standards. At last, the evaluation of the economy of Australia is done in
order to understand the c\major challenges that re faced by the economy in the recent trends to
overcome the dynamic situation effectively.

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