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Stocks and Local Financial Markets of the Future

19 September 2007 - Features - Editor

Mergers and acquisitions are popular in every stock market because investors associate such moves with exceptional profits and with value appreciation as well. However, does the growing tendency of entire Exchanges to try and swallow each other, have merits? Can a stock market in one country gain by investing in control of a peer in a neighboring country?

Computers and satellites have changed the old stock market structure for ever. Truisms of yesterday have become prescriptions for future failures. Funds invested in acquiring ‘more of the same’ can yield no returns of any consequence. The stock market must change its approach to be successful in a global environment.

Four key trends show the path to the stock market environment of the future:

The first is that a stock market should accept all major currencies and allow trading in stocks and securities all over the world. The Middle East has stolen a march on stock market pioneers in this respect. NASDAQ has been nimble as well, opening an office in India long before the rest of the world took notice of this emerging giant.

Secondly, while stock market veterans may still celebrate their wins by waking at odd hours to find out how an Exchange at the other end of the world had reacted to a short-term development, trading has become a 24x7 operation today. Screen based options are not enough, because even minutes can found when sophisticated transactions are afoot. The stock market which goes to bed or which opts for 5-day weeks might as well fold up forever!

Third, innovative products and services will be hallmarks of every top stock market in the future. Global investors have choices like never before: they will naturally flock to Exchanges which treat them like royalty, and which attract participation in creative ways. The solid values of yesteryear have become staid practices today, and modern investors brim with confidence as they embark on high return adventures from which their predecessors would shrink.

Finally, retail investors have begun to come in to their own on every stock market. Decades of business management and financial training have raised general awareness levels about investing to unprecedented levels. Exchanges and managements of listed securities which are used to road shows and detailed expositions for institutional investors must be ready to be as forthcoming and professional in their presentations for the individual fund manager in the rapidly unfolding scenario.

 


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