Question

Nukee, a United States shoe manufacturer and retailer, established two retail outlets in the city
of Shenzen, China, which has a population of 3.7 million. These outlets are massive and contain
products purchased locally as well as imports. As Nukee generates earnings beyond what it
needs in Shenzen, it may remit those earnings back to the United States. Nukee is likely to
build additional outlets in Shenzen or in other Chinese cities in the future.

Explain how Nukee could use the international bond market to finance the establishment of
new outlets in foreign markets?

Answer 1

Nukee can use International bond market to finance new outlet in foreign markets as follows-

A. International bond market will be providing with going with long term bonds in order to raise capital in the foreign currency and it will be helping the company the generation of long-term capital.

B. it will be helping in gaining the foreign market exposure for the company also because company can be gaining exposure and it can invest in the economies of other countries by issuing bonds and raising capital in the foreign currency.

C. International bond market will also offer the company with their diversification benefits because it will be having various kinds of capital which are issued out of different countries so the risk will be minimised.

D. It will also help the company to raise capital at cheaper rate by issuing of bonds in foreign currency whereas interest rates are lower so that the company can be able to easily decrease the cost of capital

E. it will also help the company in order to deal with the foreign exchange transaction risk and foreign exchange translation risk by having an exposure in the bond markets.

F. it will also help the foreign company to improve the portfolio risk profile and it will also help them to help against the falling domestic currency.