What International Politics Means for Stock Investment (Part 1)
A US Presidential campaign brings stock market and governance links to the fore. Patterns of campaign donations provide glaring evidence of how a stock exchange is driven. Candidates make promises about policies they will implement on winning, and investors can use these leads to predict future stock price trends. Other countries and forms of governance also have their own links between stock market sentiment and politics.
The era of unconditional international economic aid is over. Some may argue that it never existed! However, all shades of ideology will now concede that stock exchange fortunes sway with political alignments. Regulation is a major part of this. The European Union is sticky about its members subsidizing their local stock market operations, but conditions in other continents are not the same. The government is a significant stock market player in many countries. The most powerful nations jockey for influence through the stock exchange mechanisms of dominion nations.
Brazil, India, China, and Russia, are not markets or sources that any global corporation can ignore. Governments have large and pervasive influences on business in these countries. The influences of national politics in these nations on their stock exchange mechanisms are more direct than US, Japanese and EU norms. Islamic banking in the Middle East and in parts of South East Asia is another powerful example of how international business must accommodate trends of local societies.
Technology, know-how, and capital, act as counter-balancing forces to the powers of national tastes, preferences, and beliefs. Venezuela will realize this in time, as it searches for cutting-edge methods of leveraging its natural assets in the energy sector. African countries cannot expect the largesse from the World Bank that India enjoyed during its socialist years. Poor countries have to meet the needs of private equity and corporate capital if they are to find finances for national development.
The first decade of the 21st century is likely to end with a tantalizing balance between the competitiveness of nations, and their attractions for global business. Every stock market will prefer listed members with firm feet in as many countries as possible, though excessive dependence on unstable ones will only serve to make stock prices volatile.
Aircraft manufacturers, research-based pharmaceutical companies, and global consumer brand owners, may serve as benchmarks for stock investors, governments, and for new companies as well. All stake holders of every stock exchange can study industry leaders in these sectors, in order to guide stock investment and corporate evaluation efforts.