International Issues: Global Equity Markets

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Table of Contents

Introduction
Strengths
Weaknesses
Opportunities
Threats
Conclusions
Reference

Introduction

With the opening of international trade routes and globalization of movement of goods, services and utilities, spawned by technological advancement and the internet, global equity markets have been receiving wide attention in recent years, thanks to the opening up of global economies. Therefore, it is now possible for an investor sitting in Mumbai or New Delhi to transact in the London or New York stock exchange, through the process of global equity market schemes.

The main aspects of global equity trading, beside being more profitable for investors is that it provides a higher assessment expertise from given levels of market rules. Further, it reduces price fluctuations through market inefficiencies and also considerably enhances the improvement in macro economics and financial essentials. Higher returns envisage higher risks for investors and this applies to global markets too, where the capricious tendencies of stock markets are fully manifest.

Again the apparent anonymity of global investors could camouflage illegal and fraudulent transactions, and therefore need to have maximum control, security and transparency. However, it is widely believed that “Global equity markets, in essence safe and predictable only to those few who truly understand them, are capable to provide sophisticated investors and traders alike with plenty of rewards. “ (Global equity markets, (n.d)).

It is now necessary to conduct Strength/Weaknesses/Opportunities &Threats (SWOT) Analysis to determine efficiency from investor’s perspective.

Strengths

The innate fluctuations and vicissitudes in Stock Exchanges worldwide need to be arrested through diversifying the application of funds in different kinds of investment activities like FDI, public and private placements of debts and institutional financing. Besides this, a primary tool could also be through global equity issues

Again, it is seen that domestic equity issues may be subject to government rigours and stiff conditional ties, which could be avoided through global equity placements. It is also important that major companies, who may be keen to enter foreign markets through public issues, need to have their shares traded in foreign stock exchanges. It is very important that the financial system should stabilize and companies need to provide sound financials.

“Equity markets will not find solid footing until the financial system stabilizes,” says Pierre Lapointe, market strategist at National Bank Financial. “One thing we have noticed is that the latest market rally is different from previous ones. This time around, investors have bought into financials. This is good news, because equities have never rebounded from a recession without a strong contribution from financials.” (Pett, 2009).

Global equity trading facilitates new sources of financing and helps broaden capital base of equity while also bringing wide cross culture of investors.

Weaknesses

There have been many instances of unscrupulous traders conducting fraudulent activities for personal gains. Again, since backgrounds of global communities may not be easily gained, there are possibilities of losing heavily in global stock activities. Country specific rules and regulations are also present that may curb, or restrict trading. Political influences, cornering of shares and insider trading are major weaknesses that beset global equity trading.

Opportunities

That being said, it is quite possible that the investing public and the companies may stand to gain immensely by high performance of global equity markets that may cause phenomenal share growth and earnings, and also declare handsome and consistent dividends. As a global trading facilitator, global equity markets serve to enhance the worth of economies also through a process of safeguarding the assets of corporate of different parts of the globe. Besides, it improves the trading technologies between countries.

Threats

By far one of the major threats is insider trading, by which large individual profits may pro-offer to unscrupulous traders, perhaps at the cost of the company whose shares are being so traded. Again, it is possible for frauds, misrepresentations and illegal transactions to be perpetrated that may not be easily visible, or detected. Economic meltdowns, wide ranging economic debacles, currency fluctuations, political and economic crises do also influence movements of global equity markets. “The markets now will have to readjust to the fact that US consumers not only will restrain the apathy for goods and services, they will also look for domestic US products.“ (Adelton, 2006).

Conclusions

It is seen that in the present economic meltdown in US, and other advanced economies, these could record dismal performance for individual stockholders. However, it is believed that by 2010, the global equity market would stabilize once again, as it is already on the road to stability.

By 2010, all the policy implementations for injections of equity into the economy, impacts of banking and trading reforms and various institutional measures would show results, which would also be most promising for the global equity markets.

Reference

Adelton, Sam. (2006). World equity markets surprised with US dollar drop- underestimated the weakness of the US economy. India Daily. Web.

Global equity markets. (n.d). Bulls Versus Bears. Web.

Pett, David. (2009). New found resilience in global equity markets. Calgary Hearld: Division of CanWest Publishing Inc. Web.

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