Capital Allocation in Domestic and International Financial Markets

International Trade
Finance Investment

Table of Contents
INTRODUCTION...........................................................................................................................2
EXECUTIVE SUMMARY.............................................................................................................2
TASK ..............................................................................................................................................3
A) Background of financial markets...........................................................................................3
B) Capital allocation within domestic economy.........................................................................4
C) Capital allocation within international markets.....................................................................6
D) Evaluation Of UK Economy..................................................................................................7
E) Critical Evaluation of challenges faced by the country due to industrialisation and Trade
policies........................................................................................................................................8
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
This report consist of capital allocation in the financial markets of domestic and
international Economies. Capital Allocation is related to the idea of deciding how much and
where the funds should be invested to earn profits. It means investment and distribution of
organisation's financial resources that increases its efficiency and maximise profitability. The
main aim is to generate as much wealth as possible for the organisation's shareholders. It is the
most relevant and vital factor for the success of an organisation in terms of its sustainability and
value creation (Ahn, 2020). These decisions are majorly taken by the board and management
committee of the organisation. Making the right choice of the capital allocation strategy is
important for an organisation for maintaining its long term growth and increased returns for its
stakeholders.
EXECUTIVE SUMMARY
This report is based the capital allocation in the financial market in domestic and
International Economies. The economies evaluated and worked upon in this report includes UK
economy, China Economy and US Economy. U.K. Economy is highly developed market
oriented economy which is socially developed. It is the most globalised economy. China's
Economy is a close ended economy and a mixed socialite market economy. It has three out of ten
world's largest stock exchange. The economy of U.S. Is a mixed and highly developed economy.
It is largest in terms of nominal GDP and Net wealth in the world. It is the most powerful
economy in form of technological advancement in the world.
TASK
A) Background of financial markets.
A market is a place where exchange of goods and services takes place among two or
more parties with the exchange of money or money equivalents. Financial market refers to the
place that involve variety of financial transactions by an individual, a group or an organisation.
This platform involves sale and purchase of financial products such as shares, bonds,
debentures , mutual funds and so on. Here creation and trading of financial assets takes place and
it plays a vital role in allocation of scarce available free resources. It acts as the intermediary
between investors and collectors and facilitates funds mobilisation among them (Butler, 2016). It
acts as a platform between buyers and sellers for meeting, trading assets for a price that enforce

demand and supply. Financial markets play a big role in operation of capitalisation economies by
assigning resources and creating liquidity for business and entrepreneurs. It allows business to
grow and raise money for their ventures and claims the economy by inculcating confidence in its
investors by stabilizing the economy. Financial market make it simple for buyers and sellers to
trade their financial holdings. This market generate securities products that provide a return for
those who have excess fund and make these funds available to those who need additional money
(Brack, 2017). Financial market also known as stock market. In this market equities, bond,
currencies can be buy and sold by the persons. Some financial markets are small with little
activity for example: The New York Stock Exchange (NYSE), trade trillions of dollars of
securities daily. It rely heavily on the transparency of information that ensures the setting of
market prices in an efficient and appropriate way.
Types of Financial Market
Over the counter Market- It is a decentralised market having no physical location and
the trading takes place through the electronic platforms where trading takes place between the
parties without the involvement of any broker. The transactions related to the publicly traded
stocks that are not listed are being handled by the OTC markets. Generally companies traded on
this platform are smaller than the companies traded in the primary market. There are less
regulations and costs low for use.
Bond Market- Bonds are the securities which acts as a loan taken by the company for a
fixed defined period and at a pre determined interest rate. It acts as an agreement between the
lender and the borrower containing the details about the loan and its repayment. Loans are issued
for funding the finance projects and operations by the municipalities, government and states. The
securities traded in theses market includes notes, bills and other similar tools. This market is also
called debt, credit and fixed income market.
Money Market- The securities traded in this market are relatively for short term and
highly liquid in nature. They ensures high security but have less returns in terms interest income.
There is an involvement of large volume traded securities between institutions and traders. It
includes money market mutual funds pooled by the investor and money market accounts opened
by banks (Carboni, 2017). Few tools of this market are treasury bills, overnight reserves and
commercial papers.