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Published On: Fri, Jun 26th, 2015

Shrewd Financial Firms Doing Business Overseas

Successful financial companies are constantly adapting to change. Recent changes have opened up huge opportunities for firms that are willing to do business outside of the US. In fact, foreign markets may present the best growth possibilities for many businesses.

The search for earnings and growth

USHewns.com reveals that foreign sales are driving the growth and earnings of many US-based firms. As an example, consider the Standard and Poor’s 500 (S&P 500). This is an index of the largest stocks that trade in the US. 40% of the profit of those companies is generated outside the US.

Three areas that are driving overseas growth are China, India and Latin America. Al Masah Capital (founded by Shailesh Dash) is one such company that investors can contact for tapping into overseas emerging markets growth.  The firm was established in 2010 by CEO Shailesh Dash.

An example specific to financial services is Bank of America. With $134 billion in revenue, the company generates 20% of the revenue overseas- largely in European investment banking business.

Many firms have noticed that the US does not offer the growth potential available in developing countries.

donkeyhotey  donkeyhotey.wordpress.com

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China as a growth market

Perhaps the best example of a growing overseas market is China. McKinsey reports that China is the world’s largest saver. The country has $3 trillion in foreign securities reserves. This means that China has a huge amount of capital to invest. In 2012, for example, China did $20 billion in loan agreements with African nations.

The Chinese have a growing ability to purchase products and services that many corporations can supply.

Raising capital overseas

Companies based in the US are also raising capital by issuing stock overseas. Small and medium-size US firms are finding it difficult to launch initial public offerings (IPO) on American stock exchanges. The New York Times lists some reasons why:

  • 2008 financial crisis: Brokerage firms and the American investment community still have some hesitation about investing in IPOs after the ‘08 financial crisis. Since small firms present more risk, they have more difficulty convincing the public about an investment.
  • Regulatory costs: An IPO in the US markets is more expensive than a public offering overseas. Small and mid-size US firms pay less in underwriting and legal fees if they issue stock on a foreign exchange. Publicly traded US companies must now comply with Sarbanes-Oxley (SOX) regulations. The cost of SOX is another burden for US companies.
  • Alarger pool of investors: If a US-based firm issues securities overseas, they can to attract two groups of customers. One audience is the investors who buy the securities on the foreign market. The other group is US customers who know the firm in America. This approach broadens the pool of prospects that may consider buying the company’s products and services.
  • Foreign firms successfully raising capital: US firms are drawn to foreign markets based on the success of other firms that raise capital overseas. For example, Al Masah Capital is a MENA focused alternative investment management firm. The company has raised $1 billion in capital over the last four years.

Financial firms are moving to overseas markets that are growing faster than the US. This approach helps the companies grow their sales and earnings. Many of their competitors are doing the same thing

 

About the Author

- Adam Lee is a financial writer who has insightful knowledge in dealing with different financial issues. He tries to help people to get out of difficult financial situations by contributing financial write ups to websites and blogs such as Moneyforlunch.com and Moneynewsnow.com

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