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On the world's financial markets and stock exchanges. Part 6

The main aim of the lecture is to understand that despite the variety of financial market instruments and the possibility to use them, the main factor of choice is the ability to correctly analyse the current situation with a view to future developments. 


1. Financial markets


A financial market is an organised institutional structure for the creation and exchange of financial assets. The financial market is focused on capital mobilisation, the provision of credit, and the execution of monetary exchange transactions. The main regulator of the national financial market is the Central Bank (CB). The aggregate of national financial markets is called the International Financial Market (IFM). This market functions through the existence of appropriate infrastructures that ensure and maintain the integrity of the IFR. 
The International Financial Market is governed by various kinds of international agreements and international institutions. The organisations that ensure the functioning of the financial markets include: International Monetary Fund (IMF) - an inter-governmental organisation established to regulate monetary relations between IMF member countries and to provide them with financial assistance in case of currency difficulties caused by trade deficits by providing short- and medium-term loans in foreign currency. The IMF is a specialised agency of the United Nations. It currently has 184 member countries. The World Bank Group, which consists of five associations established by member states: the International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), International Finance Corporation, International Investment Guarantee Agency (IGA), International Centre for Settlement of Investment Disputes (ICSID) According to Forbes magazine, 24 per cent of the world's billion dollar wealth is made by people who do business in the global financial markets. 
Financial markets can be roughly divided into main segments: 

  • Commodities Market - a market in which commodities are traded;
  • The stock market can be conventionally divided into the Stock Market, where operations with shares on initial offering (IPO) and their secondary redistribution are carried out, and the Bond Market - a market of various liabilities from corporate to state with different execution terms;
  • The international currency market Forex, where currency exchange transactions are carried out.

The above-mentioned financial markets are interlinked by capital movements and therefore have a strong influence on each other. Of course, the mutual influence of these markets is not a linear and unambiguous process. It is helpful to be able to analyse the market to understand this.

2. Tasks to be solved by financial analysis 

The task of a person who has earned money and does not plan to spend it in the near future is to protect the income from inflation. And even better to make the accumulated funds work for their owner and bring profit. The modern economic realities of today's world offer a lot of tools for multiplying capital. Many of us often wonder how to save, and better to multiply their hard-earned money? For example, to save for a new car, or even a flat. Store in a stocking, as our grandfathers and grandmothers, not profitable - inflation "eats" each year by 10-12%, and property prices are rising even faster. If you put money in the bank, you can barely cover losses from inflation, but you cannot increase your capital. As it turns out, the dollar not only knows how to rise, but also how to fall, so buying foreign currency is no longer a viable option. 
What are the traditional forms of investment? Gold, jewellery, art and antiques? They are associated with relatively low liquidity, dependence on market conditions, high security costs, insurance, valuation, constant risk of theft or damage. 
Real estate? - A very common position. Almost all Russians who have free money are trying to use them to build something or buy, and then some people sell at a profit, and some rent it out. The liquidity of such investments is quite low, it is not always possible at the right time to sell a house or a flat at a price you would be happy with. And if your house costs 100 thousand, and you urgently need 10 thousand, then what - sell only the roof or one room? 
It is not enough to make money; you need to be able to save and multiply it! Perhaps everyone wants to control their investments and choose the level of income at their discretion? Hence, the main criteria for choosing investments - risk, liquidity and profitability!
When selecting a particular investment, the liquidity of the product must be considered, and liquidity in this case means the ability to easily obtain a cash equivalent, i.e. not only the ability to sell the instrument, but also the quickness with which one can get money for it.
Investments have three main purposes: 

  • to create a stream of income;
  • to achieve capital appreciation;
  • a combination of the first two objectives with some specific end goal.

Income can be defined as the regular inflow of cash to cover expenses. This cash flow usually takes the form of interest (from bonds) or dividends (from shares), but income can also be generated from capital in the event of liquidation. 

Capital gains can be defined as a price increase through an increase in the cost of equity or through the continuous reinvestment of compound interest. 
Since no one can guarantee the profitability of an investment, and there is always the possibility that the value of the investment will fall, the most important of the above factors is the investor's approach to risk. The higher the risk involved in a given product, the higher the rewards the investor will want to receive; the longer the investment period, the higher the rewards the investor will expect.
And the last characteristic of an investment product that needs to be taken into consideration is whether the product brings current income or whether it is more suitable from a capital growth perspective. 
Again in general terms, investments that are considered low-risk include: government securities; bank deposits, mutual funds investing in government securities. 
High-risk investments include: equity instruments in cases where shares are not listed on a stock exchange; derivative instruments such as futures.
Ultimately, when making an investment decision and selecting an investment target, an investor must ask himself or herself two questions:

  • Can I afford to lose all this money if the investment is unsuccessful?
  • What is the probability that this investment will fail?

Bank Deposits 

Bank deposits have been and continue to be the most popular way for Russians to save their money. With the adoption of the law on deposit insurance and the establishment of "white lists" of banks, the risk of losing savings has been minimized. However, today the rates on ruble deposits often hardly reach the predicted inflation level, and if to follow the unofficial forecasts, they are even lower than it. This means that although the depositor will get more money in nominal terms than he originally had, he will be able to buy less with the money he gets. 
Deposits in foreign currencies can help to reduce the losses. However, before going to the bank, it is better to read the expert's opinion on possible currency fluctuations in the coming year. Depending on macroeconomic events, different currencies may be more reliable. 
In the West, banks are trusted by a smaller percentage of the population than in Russia. Residents of developed countries are used to diversifying their savings, that is, dividing funds and making them work in several directions at once. Such an approach makes it possible to minimise risks and, at the same time, get a decent raise. But our compatriots are also beginning to realise the obvious advantages of investing in high-yield instruments. 

Mutual funds

One of the most popular investments among investors is in mutual funds, or Mutual Funds. These funds are created by investment companies with the purpose of accumulating clients' funds for placement on the stock and bond markets. The distinctive feature of mutual funds is that the client does not need a lot of money to buy shares. Moreover, you won't need to start your morning by looking at quotations - experienced brokers will decide which securities to invest in today and which tomorrow. Mutual funds have a sufficiently detailed legal basis, which reduces the risks involved. 
A client can choose whether to trust a high-yield mutual fund and take risks, or to invest in a stable fund which doesn't promise huge profits but also minimises the risk of losses. For example, some funds, due to the bankruptcy of Yukos, had negative returns in the second half of 2004. However, other funds' portfolios contained not only blue-chip stocks (i.e. companies, whose securities are the most liquid), but also shares of second-tier companies and bonds, and therefore earned good profits for their investors. 
It therefore makes sense when investing in mutual funds to spread the money over a number of funds: some to a high-yielding but risky mutual fund and some to a stable mutual fund (e.g. a bond fund), but lacking in high yields. 

Stock market 

Not everyone likes to entrust their savings to a third party. For such people, working with a personal broker is preferable. Working with a broker differs from investing in a mutual fund because you can decide for yourself which securities to invest in. However, the amount you will have to invest will also increase to several tens of thousands of dollars. The broker will advise, but the client has the final say. As soon as important events for the client's portfolio begin occurring on the securities market, the broker will call the owner of the securities at once and ask for guidance: should the securities be sold when their value is falling, or you should hope for the best and wait for some time. In this way, the responsibility for the preservation of funds will be entirely on the client's shoulders. Finally, if a person is experienced enough, he can manage his own shares. For that he will still have to become a client of the investment company, but now he won't have to give a part of his profit to the broker. The company will provide the client with software and they will be able to buy and sell securities at the monitor of their computer. Investment firms usually charge a small percentage of the transaction, a few hundredths of a percent for their services. They can, however, provide a "leverage", meaning they lend money to a trader. "This may be necessary if a trader is sure that the stock of a company will rise (or fall) and wants to make a large profit on the price movements. 

Forex and commodity market

Forex trading and trading with various raw materials have become more and more popular lately. In the currency market, the most popular and attractive currencies are those of the most developed economies. In the commodities market, trading in oil, gold, gas and silver is gaining popularity. The technology of Forex and commodities market trading does not differ much from the stock market - we analyse the movement and depending on our conclusions, we conduct buy or sell operations.

The above options of investing money are not all possible ways to make a profit with the help of free funds. However, they are the most accessible financial instruments with which money can work and bring a solid income. 

3. Securities as a special kind of commodity

The key task that the securities market has to fulfil is, above all, to ensure conditions for attracting investment in enterprises and for these enterprises to have access to capital which is cheaper than bank loans.
The main participants in the securities market are:

  • the state;
  • brokers;
  • investors buying shares;
  • banks;
  • pension funds;
  • insurance companies;
  • mutual funds.

The composition of securities market participants depends on the stage at which production and the banking system are at, as well as the economic functions of the state. This determines the way in which production and public expenditure are financed. 
Issuers of securities are those who are interested in short-term or long-term financing of their current and capital expenditures and can prove that they can be trusted as a borrower, debtor and entrepreneur. 
The three most common types of financial intermediaries known in the world are 
- deposit-type (commercial banks, savings and loan associations, mutual savings banks, credit unions); 
- contractual savings type (life and property insurance companies, pension funds) 
- investment type (mutual funds (mutual or open-end investment funds)), trust funds, closed-end investment companies (or closed-end investment funds). 
Those who invest in securities for the purpose of earning income are investors. In the cash securities market, banks dominate as investors, while at the same time, as intermediaries, they partially place short-term securities with their clients (e.g. commercial banks of some corporations offer other corporations). In the capital securities market, there has been a historical evolution from the predominance of individual investors to the dominance of institutional investors. 
Insurance companies and pension funds - state, local government and corporate - have become the largest investors, first in the US and later in other developed countries. They invest all their available funds in the safest securities, making enormous profits 
Where can one expect to get the highest return on investment? Certainly, where the world's largest capitals work, where powerful financial flows pass through. One of the most interesting areas is the stock market. 
Russia has chosen a mixed model of the stock market, where commercial banks, which have full rights to securities transactions, and non-bank investment institutions are present simultaneously and with equal rights.
One of the most voluminous markets is the government debt market, which includes: 

  • Long- and medium-term bond issues placed among the public;
  • short-term government bonds issued in 1994;
  • long-term 30-year bond issue of 1991;
  • domestic currency bonds for legal entities;
  • treasury bonds.
  • The private securities market includes :
  • The issue of shares in state-owned enterprises converted into public companies;
  • an issue of shares and bonds of banks;
  • an issuance of shares of cheque investment funds;
  • an issue of shares of newly created joint stock companies;
  • Bonds of banks and companies.

4. Investment objectives and decisions

A financial analysis should be carried out to determine the asset. What does it consist of? 
The traditional approach to complex financial analysis refers to a set of methods, tools and techniques used to collect, process and interpret (interpret) data about a company's business activities. 
The main purpose of any type of financial analysis is to evaluate and identify internal problems of a company in order to prepare, justify and make various management decisions, including those related to development, exit from crisis, transition to bankruptcy proceedings, purchase and sale of business or stock, attraction of investments (borrowed funds). 
To evaluate the investment attractiveness of Russian enterprises, we propose the following scheme of analysis, consisting in the study of six main blocks:

  • Indicators of the financial position of the enterprise.
  • Indicators of the market position and competitiveness of the enterprise's products.
  • Indicators of the organizational, technical and staffing level of the enterprise.
  • Indicators of resource use in the enterprise.
  • Indicators reflecting the company's dividend policy.
  • Indicators characterizing the structure of owners (shareholders) of an enterprise.

Indicators of financial position of the enterprise are the most essential for investors According to the standards accepted in the world, when performing complex financial analysis, it is necessary to make an accent on the following components 

  • Analysis of balance sheet structure and net working capital .

When calculating the structure of balance sheet, its changes are analyzed and the impact of individual balance sheet items on overall balance sheet structure is evaluated; 

  • Liquidity and financial stability analysis.

The liquidity ratio is one of the most important characteristics reflecting the company's ability to pay its bills on time. It is particularly important for banks when they are lending money, because it shows how dependent the company is on external sources of funding; 

  • Analysis of profitability and cost structure.

Profitability refers to the ability of the enterprise to make a profit on the funds invested in current operations. It may in fact be the decisive criterion 

  • Turnover analysis

This analysis takes into account the turnover of assets, liabilities and the so-called 'net cycle', which in a simplified version is the difference between the turnover of assets ('cost cycle') and liabilities ('credit cycle'); 

  • Profitability analysis.

The profitability of an enterprise occupies a special place in the complex financial analysis, because it makes it possible to assess the efficiency of the use of funds invested in the enterprise.

  • labour efficiency analysis .

This indicator is, in our view, particularly relevant for businesses. In the context of shrinking production volumes it is necessary to clearly define the degree of labour efficiency of those employed in production. This makes it possible to conduct a more balanced personnel policy in the enterprise. 
Depending on the specific tasks, financial analysis may take the following forms 

  • express analysis (designed to provide a 1-2 day overview of a company's financial situation on the basis of external accounting forms);
  • complex financial analysis (it is designed to obtain, within 3-4 weeks, a comprehensive assessment of the financial position of the company on the basis of external financial statements and statements, analytical accounting data, independent audit results etc.)
  • financial analysis as a part of general study of company business processes (intended to obtain a comprehensive assessment of all aspects of a company - production, finance, procurement, sales and marketing, management, personnel, etc.);
  • targeted financial analysis (designed to solve a company's priority financial problems, e.g. accounts receivable optimization);
  • Regular financial analysis (designed to set up effective financial management of a company on the basis of presentation of specially processed results of complex financial analysis in due time, on a quarterly or monthly basis).

Depending on the areas specified, financial analysis can take the following forms: 

  • retrospective analysis (designed to analyse established trends and problems in a company's financial situation; as a rule, quarterly reports for the last reporting year and the reporting period of the current year are sufficient);
  • Plan factual analysis (required to assess and identify reasons for deviations of reporting figures from planned figures);
  • Prospective analysis (required for examination of financial plans, their validity and reliability from the point of view of the current state and available potential).

Fundamental analysis is carried out at three levels (top-down analysis) 

  • Macroeconomic analysis, the result of the stage - determining the state of the national economy as a whole and answering the question of what stage of the life cycle (economic) the economy is at and deciding whether or not to invest in the national economy
  • Industry analysis. The objective is to identify sectors with the highest investment attractiveness. Investment attractiveness is the ability of an industry to deliver maximum return on invested capital; subjective investor preferences are taken into account. Investment attractiveness depends on the lifecycle phase of the national economy and the industry itself.
  • Company analysis. The most potentially interesting companies in a given industry are selected and analysed in terms of investment in a particular company (the most time-consuming and expensive analysis).

The company analysis consists of two types of analysis - economic (qualitative) and financial (quantitative).

The algorithm of traditional financial analysis includes the following steps: 

  • Gathering of necessary information (the scope depends on the tasks and type of financial analysis).
  • Assessment of credibility of information (usually using results of an independent audit).
  • Information processing (preparing analytical tables and aggregated reporting forms).
  • Calculation of financial statement structure indicators (vertical analysis)
  • Calculation of change indicators in financial statements (horizontal analysis) - tehanalysis
  • Calculation of financial ratios for major aspects of financial performance or interim financial aggregates (financial stability, solvency, business activity, profitability).
  • Comparative analysis of financial ratios with normative values (generally accepted and industry average).
  • Analysis of changes in financial ratios (identification of deterioration or improvement trends).
  • Calculation and assessment of integral financial ratios (multi-factor models for assessing the financial condition of the company, the best known of which is Altman's Z-score).
  • Drawing conclusions on the financial position of the company based on the interpretation of the processed data

Thus, a comprehensive financial analysis touches on practically all aspects of a company's operations. And it is not always necessary for banks and potential investors. Such an analysis is necessary first and foremost for the enterprise as it makes it possible to give an impartial assessment of its performance at a particular point in time or over a period of time. The most common method for estimating the true value of a company abroad is to use Gordon's formula: 
NPV = FP1/r - g, 
where NPV - net present value of the enterprise; FP1 - financial indicator of the first forecast year; r - discount rate for equity; g - expected constant growth rate of financial indicators. Control over the financial flows of an enterprise is by no means the most important thing in financial analysis. It is only the foundation on which the building - assessment of the financial condition of the enterprise - is built. In our opinion, the most important thing in financial analysis is to evaluate the performance of the enterprise in previous periods and to determine how it is likely to evolve in the short and longer term. It is important to know how an enterprise has evolved over a certain period of time and to be able to forecast its future evolution; this is what technical analysis can successfully do. 
Now back to technical analysis from an investor's perspective. 

 

The most important characteristics of financial assets that are available to all market participants for analysis are their market prices. For different types of financial assets, prices can be expressed in different ways, e.g. as prices for buying and selling stocks and bonds, exchange rates, interest rates on deposits attracted and deposited. The totality of these characteristics for all assets at any given time determines financial market conditions and is the object of analysis by market participants. 
Prices of securities on the competitive stock market are based on demand and supply of securities, which are formed according to market participants' perceptions of their "true" value. The true value or intrinsic value of a security V is usually not known and is the object of evaluation by market participants. For this purpose, securities market financial analysis methods are used. 
The primary objective of financial analysis when buying or selling securities is to identify market mispriced assets, i.e., assets for which their market price P is not the same as their estimated true value, i.e., P ¹ V . Then the "golden rule of investing" is used: "buy cheap and sell dear", i.e. "undervalued" securities are bought (at P < V ) and "overvalued" securities are sold (at P > V ). 
In doing so, market participants expect the market to adjust asset prices in a favorable direction, assuming that an increasing demand for undervalued securities will cause their exchange rate to rise, while an increase in the supply of overvalued securities will drive down their market price. This expected price movement, according to economic theory, allows investors to hope to earn income through reverse transactions in securities, for example, by selling at a higher price securities that they bought "cheaply" earlier. 
In an "efficient market", such activities of market participants lead to an equilibrium between supply and demand for securities and, therefore, to an "equilibrium" price of securities at their "true value". A measure of the effectiveness of such transactions is the relative change in an investor's capital over the period that money is invested in securities. This characteristic is called the rate of return of financial investments or simply the rate of return, and is defined by the expression: 
R = W 0 /W 1
Where: W 0 , W 1 are capital (wealth) of investor at the beginning and at the end of investment period respectively. When dealing with securities, however, one has to look not only at their yield, but also at the risk that the actual yield may be different and, as a rule, is different from the expected yield. This is due to the uncertainty regarding future asset prices and returns. 
Different categories of investors may have different objectives. 
For example, a speculative investor (trader) seeks to gain profit from the difference in prices of buying and selling assets. Buying an asset today, he hopes the price of the asset will rise in the future. That is why it is important for him to buy an asset "undervalued" by the market. A trader who executes a "short sale" is hoping to sell assets that are "overvalued" by the market and therefore will be able to buy them back on the market at a lower price in the future when unreasonable demand for them declines. 
Portfolio managers, who are involved in portfolio management, try to achieve an acceptable return with minimal risk through optimal diversification (variety) of investments. Along with asset returns and risk, they consider the interdependence, i.e., the correlation of asset returns. They are also concerned about insuring (hedging) the risk of depreciation of their assets through the appropriate choice of hedging strategies for the portfolio or individual assets, e.g. through options or futures contracts. 

 

In all cases, financial analysis techniques of the securities market are applied. A greater profit is made by those who are quicker to recognise "mispriced" assets, use more accurate forecasts of prices, expected returns and risks of financial assets and apply the most effective investment and hedging strategies. 
The task of financial market analysis (or financial analysis) is to predict market conditions at a certain time in the future based on stock exchange statistics, and to develop recommendations for investors as to which securities (SCs) to invest in and how much capital to invest in. Historically, two main methodological approaches, fundamental and technical analysis, have developed and coexist. Fundamental stock exchange analysis is based on the notion that the behaviour of securities prices is a reflection, a consequence of the state of affairs in the issuing corporation, and perhaps also of the state of the economy or industry as a whole. 
The basic premise of another traditional school of stock exchange financial analysis, called the school of technical analysis, is the assertion that all information that can be useful in making decisions in the stock market is contained in its very history, in the price movements of the securities listed on it. 
In technical financial analysis of the securities market, the performance (yield) of individual securities quoted in markets or the performance of their portfolios serve as independent variables. Technical analysis uses in its practical applications an array of statistical information about exchange rates of securities, history of their quotations (mainly these are time series of share prices and their changes, averaged over different time periods). 
Technical analysis is based on revealing and studying of historically developed "regularities" of stock market functioning on the basis of analysis of market statistics in the form of rates and sales of assets. The basis for using only this information is the assumption that all available and relevant information, including "fundamental" factors, is reflected in asset prices. 
Technical analysis also assumes that certain market patterns are stable, i.e., they are likely to be repeated and can be detected using special charts, indicators, oscillators and other "technical" methods. The emergence of certain "patterns" serves as a signal to "technical" analysts to buy or sell assets. The disadvantage of this approach is the lack of a sufficiently rigorous and systematic rationale for most of the empirical methods that make it up. Fundamental analysis is an alternative approach to stock market analysis. 
Fundamental analysis involves the analysis of macroeconomic and microeconomic "fundamentals" influencing the future earnings of companies and their asset prices. 
The main goal of traditional fundamental analysis is to evaluate the condition of a securities issuer, i.e. its income, market position, etc., on the basis of the information from balance sheets, profit and loss statements and other materials published by the issuer. Macroeconomic factors that characterise the state and prospects of the relevant sector of the economy, the region and the country's economy as a whole are also taken into account, such as such macroeconomic indicators as: consumer price index, interest rates, unemployment rate, dynamics of money supply and gross domestic product (GDP). The result is a forecast of expected returns and their allocation to the issuer's creditors and owners (shareholders), from which the current value of the issuer's securities is calculated according to asset valuation methods and recommendations are given as to whether they should be bought or sold at the current time. 

 

Currently, in their practical activities on the financial market, market participants (traders) apply methods of technical analysis and actively use the analysis of fundamental economic, as well as political and force majeure factors in decision making. This is facilitated by modern information and trading computer systems like Reuters , Dow Jones Telerate, etc., that provide users with opportunities of technical analysis and necessary "fundamental" information in the form of economic, financial, political and other news. 
Quantitative analysis of financial (stock) market is based on building statistical models of financial time series based on empirical data and using these models for forecasting prices and yields of assets, assessing risks of financial investments, optimal management of assets portfolios, hedging risks of transactions with financial assets, etc. 
Financial analysts applying quantitative methods of analysis, like "technical analysts", actively use market statistics in an attempt to build forecasts of prices and returns on financial assets. However, "quantitative analysts", unlike "technicians", use statistical models and methods that have a rigorous mathematical foundation. One of the prejudices against technical analysis by academic analysts using quantitative methods of analysis is a kind of "unscientific" jargon used by its supporters. However, in the circle of academic financial analysts interest in technical analysis has been growing lately, so in the near future this area may become an area of more active scientific research. 
Fundamental analysis is about what to buy and technical analysis is about when to buy. 
The key concept in quantitative analysis is the notion of an effective financial market. It refers to information efficiency relative to available and relevant information. 
In an efficient market asset prices assimilate all available and relevant information instantly, completely and correctly reaching equilibrium. The best predictor of an asset's price "for tomorrow" from the information available today is the price "for today", and price changes are "random walk". Buying and selling securities on such a market resembles a "fair game" with equal opportunities for all participants having the same information, which rules out the possibility of regular "abnormal" returns, i.e., returns greater than those corresponding to equilibrium asset prices. 
At the same time, in an efficient market, a "buy and hold" strategy makes sense. This makes optimal portfolio investing the main task of financial analysis. In the context of the "return-risk" approach, this task boils down to building a portfolio of assets that provides acceptable expected returns with minimal risk. 

When solving the problems of optimal portfolio investment, there is a need for statistical estimation (prediction) of the characteristics of financial assets: expected returns, risks, covariances of asset returns, etc. using statistical data. One of traditional approaches to this problem is based on the application of econometric models of asset returns. Both "market models" that do not have a strict economic justification and economic equilibrium models of the stock market can be used as such models, for example, the CAPM (Capital Asset Pricing Model) and ART (Arbitrage Pricing Theory model) models developed on the basis of the "risk-return" approach. These equilibrium models identify links between return on and risk of assets, return on assets (or asset portfolio) and return on market portfolio (CAPM model), return on assets and exogenous factors (ART model). 
There are two principal ways of attracting investment: equity investment and debt financing. In the first case, the investor acquires a share in the company's share capital, i.e. it becomes the company's shareholder, whereas in the second case the funds are issued in the form of debt and the investor becomes the company's creditor. 
Besides these types of fundraising, there are so-called combined types of fundraising, which under certain circumstances may be transferred from one category to another, e.g. convertible debentures or a bank loan secured by the company's shares. 
Equity investments are usually divided according to the type of investor into financial and strategic ones.
As a rule, financial investors do not strive to acquire a controlling interest in the company - they are interested in retaining the company's management and their interest in the project is purely financial, i.e. they expect to receive the maximum profit from the project for a given risk level. 
For a strategic investor, unlike a financial investor, the main factor influencing the value of a project is not profitability, but obtaining additional benefits for their core business from cooperation with the company. Therefore, a strategic investor in a company mostly comes from companies in related industries. 

 

 

 

 

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