4. International equity market

The international equity market consists of all stocks bought and sold outside the issuer's home country. Both companies and governments frequently sell shares in the international equity market. Buyers include other companies, banks, mutual funds, pension funds, and individual investors. The stock exchanges that list the greatest number of companies from outside their own borders are Frankfurt, London, and New York. Large international companies frequently list their stocks on several national exchanges simultaneously and sometimes offer new stock issues only outside their country's borders. Four factors are responsible for much of the past growth in the international equity market.

1. Spread of Privatization With many countries continuing to abandon central planning and socialist-style economics, the pace of privatization is accelerating worldwide. A single privatization often places billions of dollars of new equity on stock markets. When the government of Peru sold its 26 percent share of the national telephone company, Telefonica del Peru (www.telefonica.com.pe), it raised $1.2 billion. Of the total value of the sale, 48 percent was sold in the United States, 26 percent to other international investors, an another 26 percent to domestic retail and institutional investors in Peru.

Increased privatization in Europe is also expanding worldwide equity. Although historically Europe has been more devoted to debt as a means of financing, an "equity culture” is taking root. As the European Union becomes more thoroughly integrated, investors will become more willing to invest in the stocks of companies from other European nations.

2. Economic Growth in Developing Countries Continued economic growth in new industrialized and developing countries is also contributing to growth in the international equity market. As companies based in emerging economies succeed and grow, they require greater investment. Because only a limited supply of funds is available in these nations the international equity market is a major source of funding.

3. Activity of Investment Banks Investment banks facilitate the sale of a company's stock worldwide by bringing together sellers and large potential buyers. Increasingly, investment banks are searching for investors outside the national market in which a company is head-quartered. In fact, this method of raising funds is becoming more common than listing a company's shares on another country's stock exchange.

4. Advent of Cybermarkets The automation of stock exchanges is encouraging growth in the international equity market. The term Cybermarkets denotes stock markets that have no central geographic locations. Rather, they consist of global trading activities conducted on the Internet. Cybermarkets (consisting of supercomputers, high-speed data lines, satellite uplinks, and individual personal computers) match buyers and sellers in nanosecond. They allow companies to list their stocks worldwide through an electronic medium in which trading takes place 24 hours a day.