What are unique risks associated with foreign investments? How might an investor protect his/her portfolio against these risks? Is it possible to protect a portfolio from all types of risk? Explain your answer. Would you personally consider investing in foreign investments? (at least 200 words). Thanks.© BrainMass Inc. brainmass.com July 17, 2018, 7:28 pm ad1c9bdddf
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"The risks of being a foreign investor
Before you invest in an international company, you need to consider the political stability and property rights of the country it calls home. You can't always assume that every country has effective protections for shareholders' rights -- especially for foreign shareholders.
In the U.S., there's a tendency in some circles to vilify foreign capital. Consider the gnashing of teeth that took place in the early 1990s, when it seemed that the Japanese were "buying up the country." If anything, this tendency might be magnified elsewhere on Earth. As a foreign investor, you're not likely to rank high on the list of sympathetic characters in case there's malfeasance by a corporation or, more ominously, a government.
As shares of companies from less-free countries like Russia and China become more common on U.S. exchanges, questions about the risks of expropriation and nationalization of foreign companies have grown increasingly relevant to individual investors. With YUKOS -- the former oil giant -- the Russian government was more than happy to send tens of billions in shareholder value up in smoke as it pursued ownership of the company. It wasn't the first instance, and it won't be the last.
Don't cross the Kremlin
When YUKOS filed for bankruptcy late in 2004, it happened not in Moscow, but in Houston. It was part of the company's desperate attempt to stop the Russian government from expropriating its key oil-producing subsidiary, Yuganskneftegas (called Yugansk), in a sham auction, which ended up taking place undeterred. ...
The solution contains a look at the risks involved with foreign investments, and specifically cites Yukos in Russia as an example, with significant background on that situation.