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Which Stocks Can Foreigners Own? (Part 2)

15 October 2007 - Features - Editor

Which Stocks Can Foreigners Own? (Part 1)

Political Considerations for Stocks

Politics is not a traditional domain for the best investors, but top values for stocks are no longer isolated from international developments. Former communist powers are notorious for using economic means to further their global power interests. Defense has always been big business, but highly centralized economies are especially susceptible to State manipulations. Russia, China, and India, are some important countries for the business world, where communism in various hues has strong and widespread roots.

Economic considerations may be subservient to political aims in such territories, and their rulers do not shy away from using industry and commerce for changing power equations between nations and blocs.

A cozy and supportive nexus between politics and business is novel for Americans, since the two poles have been largely confrontationist in the United States. Support for private enterprise has not led to any loving relations between politicians and regulators on the one hand, and promoters of important stocks on the other. Many regulations are perceived by executives as being inappropriate, and it is normal to depend on government for vital signs of business performance. US investors, once they become enamored of opportunities abroad, especially away from traditional strongholds of democratic capitalism, must be conscious of ground realities in emerging economies where national and local governments are influential players.

How to Track Ownership Changes of Stocks

Disclosure about all changes in ownership of stocks is very clearly structured in the United States. All investors with stocks in any American Exchange should monitor changes in foreign ownership of the companies on which they depend for financial returns. The government does this routinely for strategic industry sectors such as nuclear energy, and has additional safeguards in place to protect our security interests. The situation in some other countries may not be as tightly controlled. Therefore, investors must acquire new skills as they make serious forays in to unfamiliar territories with evolving market structures and governance. All in all, global investing calls for new investor skills, and those who are on unsure ground in this regard, would do well to stick to closely held mom and pop stores!

 


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