12 International investments. In recent years many UK-based MNCs have increased their investments in foreign securities, which are not as susceptible to the negative shocks of the UK market. Also, when MNCs believe that UK securities are overvalued, they can pursue non-UK securities that are driven by a different market. Moreover, in periods of low UK interest rates, UK corporations tend to seek investments in foreign securities. In general, the flow of funds into foreign countries tends to decline when UK investors anticipate a strong pound.

a Explain how expectations of a strong pound can affect the tendency of UK investors to invest abroad.

b Explain how low UK interest rates can affect the tendency of UK-based MNCs to invest abroad.

c In general terms, what is the attraction of foreign investments to UK investors?