Fixed Interest Rate Analysis of USA, Canada and Japan

This study examines the performance of USA, Canada, and Japan in terms of stock market returns and fixed interest rates. It is observed that Japan and Canada offer positive returns to investors while the USA shows negative growth rate with high inflation. The study also analyzes the economic indicators such as GDP growth, inflation, interest rates, and exchange rates for each country. It concludes that although Japan and Canada provide benefits to foreign investors in terms of stock market and fixed interest rates, the USA performs well in terms of economic indicators, indicating a strong economy. Therefore, Australian investors should consider investing in Japan and Canada rather than the USA.

Running head: INVESTMENT MANAGEMENT
GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
Name of student:
Name of University:
Author note:

1GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
Executive Summary
This study aims to explore the market where Australian investors can conduct
investment. Study included OECD member countries, USA, Japan and Canada. Stock market
and fixed interest is considered in this study for getting idea about the performance of these
countries. Later the performance of the countries is assessed by considering economic indicators
which includes growth rate, inflation, interest rate and exchange rate. Study shows that Australia
should invest in Japan and Canada as their performance is good. Also the recommendation of
this study is , the Australian investors should use portfolio method before conducting the
investment.

2GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
Table of Contents
Introduction......................................................................................................................................4
Discussion........................................................................................................................................5
Stock market performance of emerging market..........................................................................6
Stock market performance of USA, Canada and Japan over the ten years (2007 to 2016).....6
Fixed interest rate of USA, Canada and Japan..........................................................................10
Fixed interest in USA............................................................................................................10
Fixed interest in Canada........................................................................................................11
Performance USA, Canada and Japan with respect to economic indicators.............................14
GDP growth...........................................................................................................................14
Inflation..................................................................................................................................15
Interest rate............................................................................................................................16
Exchange rate.........................................................................................................................17
Conclusion.....................................................................................................................................17
References......................................................................................................................................19

3GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
Introduction
Investment is considered as an asset that is often purchased with a view that it will
generate wealth or will appreciate in the future with greater value. Economically, this concept of
investment if considered then it can be observed that investment involves the purchase of
products that are not kept for immediate consumption but kept aside that are used in the near
future to generate wealth. But from the finance pint of view, an investment is monetary assets
that are purchased with a view that the asset will provide income in the future. Investment is also
related to economic growth because it encourages economic growth and this procedure takes
place with the utilization of sound investments at the business level. Now considering the
concept of investing it can be observed that it is an act of committing money or capital to
business, real estate and projects with the view to obtain profit.
Before investing in oversea projects countries, home country mainly places a segment of
portfolios in foreign securities. This decision mainly involves analysis of various domains which
includes stock market offerings, bond offerings, mutual funds and exchange traded funds. Thus
before conducting the decision of investing in oversea projects, countries should determine the
riskiness of the investment environments of the foreign country under consideration. Risks can
be generated from various aspects of the foreign country; these are economic risk, political risk
and business risk.
This study mainly involves the performance of three countries that are active members of
Economic Co-operation and Development (OECD) that provide ground for investing and this
ground is mainly provided to Australian investors. For assessing the performance of the countries
fixed interest and share markets over the last ten years (2007 to 2016) are considered.

4GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
Discussion
International investment mainly takes place in three kinds of market that are: developed
market, emerging market and frontier market. Developed markets mainly consist of most
developed economies and these economies consist of economic system that are developed and
urbanized. These markets are considered as safest place for investors who are considering
oversea investments. Investment analysis of developed markets concentrates on present
economic and market cycles. Globally developed markets are U.S, Canada, France, Japan and
Australia. Emerging markets on the other hand experience rapid industrialization and shows high
levels of economic growth. These high levels of economic growth have the capability to
transform investment returns that are sometimes superior to developed markets. But emerging
markets are also prone to higher level of risks. This is due to their economies are subject to
uncertainty. Political aspect of these countries is important domain to look at before considering
the oversea investment. Emerging markets globally includes China, Brazil and India. Finally the
frontier market, these markets are smaller than emerging markets. These markets are risky and
suffer from lower level of liquidity. Frontier markets globally show the market of Nigeria,
Botswana and Kuwait (Creti Joëts and Mignon, 2013).
Thus this paper concentrates on the developed economies which includes. For capturing
the level of performance of these countries the equity level performance of these countries and
fixed interest rate of these countries are assessed. For assessing equity levels, stock market of
China, India and Brazil is considered and for assessing the fixed interest rates, the government
bond of these countries are considered.

5GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
Stock market performance of emerging market
Stock market mainly consists of two sections and these are primary and secondary
market. Primary market deals with issues that include selling to institutional investors who
purchases shares of investment bank. While all the succeeding issues are dealt in secondary
market, here the main participants are institutional investors and individual investors. Stock
market investment mainly allows companies to increase their wealth by offering shares of stock
and corporate bonds. It mainly enables the investors to take part in monetary achievements of the
companies by making money through dividends the shares pay out and by selling stocks that are
appreciated at a profit.
Stock market performance of USA, Canada and Japan over the ten years (2007 to 2016)
Study concentrates on developed market economies and these countries chosen to
conduct the study are active member of Economic Co-operation and Development (OECD).
Countries chosen are USA, Canada and Japan.
USA stock market
American stock exchange is known as New York Stock Exchange (NYSE). It is
considered as world’s largest stock exchange market and is characterized by market
capitalization. This stock exchange provides a framework where buyers and sellers to deal with
shares of stock in companies registered for public trading. This stock market trades in a
continuous auction format, here traders can perform stock transactions on behalf of investors.
Nasdaq stock market is the second largest stock market and this market has three different tiers
and these are capital market, global market and global select market. This study shows
performance of Nasdaq stock market for last ten years is shown below (Carrion, 2013).

6GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
39083
39295
39508
39722
39934
40148
40360
40575
40787
41000
41214
41426
41640
41852
42064
42278
42491
42705
-0.2
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
Return
Return
Graph 1: Return from Nasdaq stock market
Source: (In.finance.yahoo.com, 2017)
The above graph shows that the trend followed by stock market is discrete one. In 2006,
Nasdaq transformed from stock market to licensed national securities exchange. A significant
activity took place in Nasdaq in 2007, it merged with OMX and changed its name to Nasdaq
OMX group. The above graph shows that return from stock market mostly is negative only few
years shows positive returns . In 2015, Nasdaq shows annualized growth rate of 9.24 percent.
Negative return mainly takes place after every four years. But in case of USA , return are
negative in year or the another. This weak performance is due to market exposure to several
issues that the country faced over the years. These issues include global financial market,
housing market bubble, dumping from China and so on.
Canada stock market
Canadian economy shows the stock market of Toronto stock exchange which is one of
the world’s largest stock exchanges. It is considered as ninth largest exchange in the world and is

7GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
characterized by market capitalization. Stock market in this considered for ten years (Bauwens
and Giot, 2013).
10/10/2006 7/6/2009 4/1/2012 12/27/2014 9/22/2017
-0.2
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
Return
Return
Graph 2: Return from Toronto stock exchange stock market
Source: (In.finance.yahoo.com, 2017)
This above graph shows the stock market performance of Canada. The graph follows a
trend which is a discontinuous one . However, the return from the stock market is mostly positive
in Toronto stock exchange. In 2008 the graph shows a negative result which shows losses at a
high level. Otherwise, the result of return shows a positive result. This steep downward
movement of the graph is due to the global financial crisis faced by the economy.
Japan stock market
Japan’s stock market uses the Nikkei 225 for showing the performance of the stock
market. It is the stock market exchange for Tokyo stock exchange. The performance of Japan’s

8GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
stock market is quite good over the years. It is mainly due to its technological progress,
improvement in economy’s financial situation (Hodgson, 2015).
10/10/2006 7/6/2009 4/1/2012 12/27/2014 9/22/2017
-0.3
-0.25
-0.2
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
Return
Return
Graph 3: Return from Nikkei stock exchange stock market
Source: (In.finance.yahoo.com, 2017)
The above graph shows that the performance of stock market of Japan is very good and
this is due to the fact the positive returns is obtained from the stock market. Initially the
condition of Japan was miserable and this was due to fall out of world war which worsen the
condition of the economy and the after period of war, the economy took long period of time to
recover . But the scenario recently in Japan is quite different as now the country is considered as
world’s largest and developed economy. Thus the economy’s performance with respect to stock
market is very good.
Thus the analysis of the study shows that if Australian investors looking for investment
then the best option available among three countries chosen in this paper USA, Japan and

9GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
Canada, then the market of Japan and Canada will prove to be a beneficial one. This due to the
fact USA economy over the last decades have shown negative value from the main reason
behind this negative growth rate is the depression through which the country has gone. With
respect to inflation also the country shows high inflation. On the other hand countries considered
in this study, Japan and Canada paves path for investors and this is due to positive return
received from stock exchange Thus Australian investors can invest in developed market of Japan
and Canada. However, looking at stock market is not enough to invest Australian investors
should also look at the fixed interest of the three countries undertaken in this study.
Fixed interest rate of USA, Canada and Japan
Fixed interest rate is the interest rates that do not fluctuate over the period of time is
allocated for loan. This kind of interest rate is attractive to borrowers who do not encourage
interest rate to increase over the term of their loans. Along with advantages, disadvantages are
involved with fixed interest rate. Loans with variable rates offer lower initial rates than fixed-rate
loans, making these loans more attractive than fixed-rate loans, especially when interest rates are
high. For this reason borrowers or investors tend to obtain the loans which involve higher interest
rate. This study uses the government bond for showing the fixed interest. A government bond is
a debt security which is issued by government to support government spending. Thus
government bonds mainly assist the fund deficits faced by the government. The disadvantage of
government bond is low rate of return from bond.
Fixed interest in USA
In USA, federal government bonds include bonds, treasury bonds and treasury inflation
protected securities.

10GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
Graph 5: Government bond in USA
Source: (US department of treasury)
The above graph shows that US 10 year government bond increased 0.02 percent to 2.20
on, September 15 from 2.18 in the preceding trading session. Historically, the United States
Government Bond 10year reached an all time high of 15.82 in September of 1981 and a record
low of 1.36 in July of 2016.
Fixed interest in Canada
Fixed interest in Canada is shown by considering fixed mortgage rates. With fixed rate
the kind of activities involved in it is saved from risk. Although this is subject of matter of risks.

11GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
Graph 6: Canada mortgage loan
Source: (Treasury bond of Canada)
The above graph shows the movement of government bond over the years. Canada over
the last ten years increased 0.03% to 2.09 on September 15 from 2.06 in the previous trading
session. Historically, the Canada Government Bond 10year reached an all time high of 12.44 in
March of 1985 and a record low of 0.95 in September of 2016.
Fixed interest in Japan
In Japan fixed interest is received from government bond. To assess the performance of
Japan’s economy. fixed interest is considered.

12GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
Graph 6 : Fixed interest in Japan
Source: (Ministry of finance, Japan)
The above graph is drawn for Japan. Japan 10 year Bond Yield increased to 0.85 percent
on September 14 from 0.83 percent in the previous trading day.10 Year Bond Yield in Japan
averaged 1.97 percent until 2016, reaching an all time high of 3.13 percent in November of 2000
and a record low of 0.04 percent in July of 2016.
Thus from the above analysis it can be observed that fixed interest is high in USA
compared to Canada and Japan , this indicates that US economy is following methods to increase
its government deficit and the economy for this reason have chosen the government bond.
Whereas, other countries Japan and Canada with low government bond rate shows low deficit in
government budget.

13GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
Performance USA, Canada and Japan with respect to economic indicators
Economic indicators of any country if considered then the result of performance level of
that country can be observed. This study relates the performance of stock market and fixed
interest of the three countries under consideration with the economic indicators.
GDP growth
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
0
10000
20000
30000
40000
50000
60000
USA
CAN
JPN
Graph 7: GDP growth
Source: (OECD)
The above graph shows that GDP growth in USA is much higher than Canada and Japan.
This GDP growth shows that USA economy is growing well and moving towards path of
achieving goals.

14GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
Inflation
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
-2
-1
0
1
2
3
4
5
USA
CAN
JPN
Graph 8: Inflation
Source: (OECD)
The above graph shows that inflation of Japan is changing its direction every year.
Deflation is mostly observed in Japan whereas in Canada the inflation is maintaining a
consistency. With respect to USA it has been observed that inflation is moderate.

15GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
Interest rate
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
USA
CAN
JPN
Graph 9: Interest rate
Source: (OECD)
The interest rate is high in USA and Canada while in Japan it is low. In USA and Canada
interest rate follows a discrete trend while in Japan it is decreasing with years.

16GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
Exchange rate
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
0
20
40
60
80
100
120
140
CAN
JPN
Graph 10: Exchange rate
Source: (OECD)
The above graph shows that exchange rate of Japan is much higher than Canada, for USA
it is worldwide considered in normalized way.
Thus assessing the economic indicators it can be observed that different countries
different manner with respect to indicators. But overall performance of USA with respect to
indicators is very good, followed by Canada and Japan.
Conclusion
The study thus shows that although with respect to stock market and fixed market rate
Japan and Canada provides benefit to foreign investors but in terms of economic indicators USA
is performing very well. Thus for Australian investors decision of investment when considered
then investment should be done in Japan and Canada rather than USA. However, the investors

17GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
should follow portfolio investment method before conducting investment in these countries as in
this way the risk associated with it will decrease and the reason behind adopting portfolio
investment is several countries face several risks.

18GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES
References
Bauwens, L. and Giot, P., 2013. Econometric modelling of stock market intraday activity (Vol.
38). Springer Science & Business Media.
Carrion, A., 2013. Very fast money: High-frequency trading on the NASDAQ. Journal of
Financial Markets, 16(4), pp.680-711.
Creti, A., Joëts, M. and Mignon, V., 2013. On the links between stock and commodity markets'
volatility. Energy Economics, 37, pp.16-28.
Hodgson, R., Allen, R., Broderick, E., Bland, J.M., Dumville, J.C., Ashby, R., Bell-Syer, S.,
Foxlee, R., Hall, J., Lamb, K. and Madden, M., 2014. Funding source and the quality of reports
of chronic wounds trials: 2004 to 2011. Trials, 15(1), p.19.
In.finance.yahoo.com. (2017). ^N225 Historical prices,Nikkei 225 Stock - Yahoo Finance.
Availableat:https://in.finance.yahoo.com/quote/%5EN225/history?
period1=1189967400&period2=1474050600&interval=1mo&filter=history&frequency=1mo
OECD. (2017). Conversion rates - Exchange rates - OECD Data. [online] Available at:
https://data.oecd.org/conversion/exchange-rates.htm

19GLOBAL FIXED INTEREST AND SHARE INVESTMENT OPPORTUNITIES