http://www.siemensjobcam.com/global-mobile-market-2005/
Global Equity Markets: 'escape From Sub Prime
Reactions in global stock markets due to the Fed's 50 bp rate cut on August 18 and 25 basis points cut, then in the end of September 18 were attractive to the investment community and financial institutions worldwide. Investment bankers, credit issuers and lenders sought relief from the credit crunch that soon followed the U.S. debacle sub prime.
Apart from the reduction of rates, central banks injected large amounts of money ($ 350 million) in the system on a temporary basis to address and contain the crisis providing credit and liquidity to capital markets. "Escape of the sub prime 'has been one of the most popular politicians of some large lenders, bankers and NBFC's who has an importance
exposure to the U.S. market collapse high risk. It is in this context that analysts, as well as
charge Policymakers have been much more concerned about a U.S. economic slowdown since the collapse of the housing market in the U.S. could lead to full blown recession because consumer spending co-related. More housing construction and home sales home means more consumer goods per capita, most people who buy household appliances, accessories and others. While less credit in the system spells destination for the automotive industry that feeds on loans car based on easy credit and mortgage loan origination to boost housing and housing markets.
Investors, anticipating problems in the U.S. market have sought refuge in another place where they have been parking their money in emerging markets has been steadily showing significant and sustained growth prospects. Despite the market shake-off by the impact U.S. lowered the emerging equity markets, the strong export-driven for fast paced development of nations is in-fact in their best economic issues since the last Asian financial crisis also 1997.Quite the remarkable economic expansion and financial reforms undertaken by two of the world's fastest most developing nations, China and India has a 8-10% growth rate through GDP.
Analysts feel a lot of ill effects due to the subprime crisis could be well protected by the emerging countries of Asia. Consumer demand and
costs are very high because of the new wealth in these countries, with others joining the bandwagon, particularly Russia, Brazil, South Africa, India, China
(BRICS), Hong Kong, South Korea and Taipei. The other Asian countries like Thailand, Malaysia, Singapore and Indonesia (ASEAN) nations are doing well in macroeconomic parameters.
Analysts might have had a vision that the growing Asian economy could buffer any large U.S. downturn, but since the U.S. remains the main importer of these countries, being the largest economy in the world (U.S. 13.5 trillion U.S. dollars) followed by Japan (4.5 trillion U.S. dollars U.S.), which has been in a "deflationary stagflation" phase since the late 90's, concern by reduced exports to these key partners persistent among market participants. The tightening credit market could further endanger mega deals as companies and major program of expansion. fundraising drive can be beaten if the sentiments of investors are more drag down risk aversion.
Few investors would lose money and in-fact is likely to seek better investment returns when markets are working well. Foreign investments in the equity markets have increased significantly in emerging markets where growth in corporate governance and higher returns are attracting global investors to pour liquidity into the stock markets. These factors have created in fact, rising asset prices and market bubbles values in various countries such as China and India. The markets are reacting to any world court, whether the Fed, Central Banks and major political changes affecting monetary and economic policies of these countries.
In the frontier world currency, continued U.S. dollar weakness off the Negotiated major currencies like the euro, British pound, Canadian dollar and the yen has been creating a great debate among strategists whether to allow the U.S. dollar find their own land or mediate. Analysts, according to Bloomberg, also have a view that if "greenback" is dropped too quickly, then investors are moving assets backed by U.S. dollars. Indeed, the dollar has fallen as far as 10% against some currencies like the euro and the Indian rupee, as noted recently the director of Asia-Pacific region, Mark Matthews of Merrill Lynch. The emerging market currencies also appreciated considerably due to huge inflows of capital and increased demand for domestic assets and foreign exchange from abroad
investors.
With the increasing importance of renminbi and Asian currencies, the dollar U.S. seems to have been taking a back seat. Although this has not happened, according to currency strategists, as the U.S. remains the largest market for investment, operating companies and the largest export market for emerging economies.
Volatility in global equity markets on the consequences of the "subprime" U.S. has increased since the slowing housing market hit the mortgage-backed bonds significantly. These bonds based on mortgages high risk, have been downgraded by S & P and Moody's rating services and investors are dumping these bonds MBS in fear of further losses. Many banks and financial institutions have purchased these bonds as their portfolios to be traded on stock markets across the board. When borrowers began defaulting on their loans housing, investors moved away from these bonds, reducing their demand for investors with growing losses reported by major hedge funds home and investment banks who own these bonds, which represents huge losses on these asset-backed securities (ABS).
The reports of these exhibitions, something around USD 1 trillion toppled the sentiments of investors and in turn decreases the risk appetite of investors. Stock markets worldwide reacted strongly whenever the subprime-related losses are reported, with markets crashing down destroying the wealth of substantial investors (USD2.5 billion dollars) worth of U.S. market equity. recessions Moreover, markets have also tested, along with some great rallies and sit-ins, in particular in emerging markets like India, China and Hong Kong, Nikkie, etc. In fact, the Hang Seng has gained so much as it has lost since this month, when it hit the 31,000 point mark before to lose about 10% of its value within a month and now trade at 27,000 points.
Bovine spongiform encephalopathy (Sensex) of India has also passed by major bull market rallies when touched 20,000 points for the first time. China's SCI 300 has been a great example bubble bag as a huge capital is chasing the Shanghai bourse. The Hong Kong provides a great platform for raising capital and issuing IPOs, as we have noted some of the larger offices intellectual property is published here by ICBC of China, CCB, PetroChina, Baidu.com,
Alibaba.com, etc. It seems the business sectors of India and China are better times for issuing IPOs. PetroChina recently, according to Bloomberg.com, it has become the first company worldwide to attain a capitalization stock of U.S. $ 1 billion, and with this, be crowned the largest company in the list.
China has also demonstrated that it has 106 billionaires, up only 15 last year, according to Shanghai-based Hurun Report published on Bloomberg. India, history of having good something similar, it is reported to have three the world's top 10 richest individuals in the Forbes list.
In the Indian scenario, the FII is making a bid for IPO pie capital markets in India's bustling. There has been much concern of the Sebi to deal with the influx of capital into the stock market through the PN route, (An alternative route unregistered investors to enter the capital markets). Policy makers are concerned about too much money chasing too few operations that could lead the stock market bubble and asset prices. Inflation is under control, about 3.5%, but there is always the fear of inflationary pressure due to oil price shock now trading near $ 100 a barrel on the Nymex. It seems that oil markets have been moving to some extent the restriction on supply worries and Iran crisis looms high, and a reduced supply from the Gulf of Mexico due to hurricane has made the situation worse.
recent crash in oil prices could cast a spell over evil developing nations that import crude oil at a price so high, and inflation could push the accompanying commodity prices even higher in those countries where the regime of effective monetary policy and economic reforms does not start. The collapse of the currency of Zimbabwe, where
has been a situation of hyperinflation as prices are rising every minute, depleted stocks, shortages of essential commodities and the lack of an effective monetary policy has resulted in an alarming situation.
Whereas some of the equity markets in African continent, according to clickafrique.com, providing attractive returns to investments in 2005 – as high as 116% (Zambia) 81% (Uganda), investors see this as a great opportunity to expand into untapped resources in Africa and kept in liquid form
investments to mobilize those resources untapped.
In Overall, the emerging markets of Asia and their counterparts are doing well, lest the crisis of subprime mortgages, where you have to watch out for possible ways to cope with mortgage bonds and exposure in the absence of the investment community to them. Any signs U.S. could affect the markets since capital markets are today have become very sensitive to any news or information to flow to markets which are enough to tickle the market sentiment.
Sources: Bloomberg, The Economic Times, Xinhua, Rueter
About the Author
Korea, Digital Capital of the World – 2/3