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Study Sees Volatility, Greater Capital Access In Globalizing Markets

December 3, 1986

NEW YORK (AP) _ Globalization of capital markets will mean greater volatility and competition as well as greater access to investment capital for companies of all sizes, according to a study for the international accounting firm Klynveld Main Goerdeler.

The study, conducted by the Naisbitt Group, also forecast increasing investment and merger activity in Europe and the Third World as financial communications improved; a global 24-hour stock market within several years; and an overhaul of the world monetary system as nations lose more control over currency rates.

″Innovation, deregulation, and competition as well as shifts in international economic conditions are trends that will dominate the financial landscape of the future,″ the study said.

The Naisbitt Group interviewed about 75 chief financial officers, financial service and government professionals to arrive at its forecast.

Campbell Corfe, a partner in KMG’s U.S. unit, KMG Main Hurdman, said Wednesday that while many of the changes outlined in the study already were taking place, the pace was accelerating toward an international ″explosion″ of change over the next several years.

Corfe said the technology that allowed swift global transmission of information also opened up vast new sources of capital that previously were not accessible worldwide. At the same time, the speed of transmission increased the volatility of capital markets, requiring a more active role by corporate financial officers in managing money and taking investment risk.

″Innovative financial instruments will continue to breed in active capital markets, coaxing bankers into offering new investment strategies,″ the study said.

Corfe noted that many corporations already were attempting to take advantage of the global market, either through internationalization of investment portfolios to organizational changes aimed at setting up global operations.

The most dramatic effect of the capital explosion was in banking, Corfe said, as illustrated by the recent ″Big Bang″ deregulation of London financial markets and the heavy international activity of the Japanese commercial and investment banking giants.

″The bank that thinks it’s just a business of lending will go broke,″ Corfe said.

While noting that financial regulators sometimes were reticent about the risks inherent in such changes, Corfe said the research did not indicate that regulatory concerns would impede the world market’s evolution.

In addition to necessary regulatory changes, implementation of international standards in areas such as bond ratings and accounting practices would help hasten globalization, he said.

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