Emerging Markets

The stock market environment has experienced over a decade of market reforms in countries such as China, Russia, and India, which were excessively and bureaucratically regulated earlier. The effects of such sweeping liberal moves reach beyond national boundaries, since markets are now so inter-related. The best companies now list on more than one stock market and access funds in more than one currency. Some corporations have taken on dimensions which rival that of some of the smaller nations of the third world. However, the egalitarian character of the new stock market has begun to produce a new breed of winners. Some established models of enterprise are now under threat. Stock market investors must look into forests of opportunities and threats, and be able to spot changes that have begun to take place in the order of business.

Here are 5 top trends which wield considerable influence in determining the new stock market rules of success.

  • Stock market democracy implies that hostile acquisition activity is here to stay. The Mittal-Arcelor story demonstrates that no management can afford to take share-holder loyalty for granted-and so should it be! However, could a company in which you have important investments be vulnerable?
  • Stock market concerns over governance have improved transparency and integrity in management, but regulators continue to uncover serious torts in some unlikely places! Full provisions for liabilities are questionable even with GAAP controls. Retail investors must know about key executives and boards, and how they are audited.
  • No stock market has ever been immune to the state of the economy in the United States. The Federal Reserve towers over the entire stock market world as investors everywhere hang on to every syllable of the Chairperson! However, the best investments may be in companies which have strong revenue lines independent of this super-power economy.
  • Competition has become more even in the stock market. The Internet in particular, with an e-commerce model, makes it more possible for small companies and for new entrants to compete with large corporations. The dominance of large brands is under attack, and can produce surprises.
  • Do we still need the traditional stock market structure? The Internet makes it possible for investors to operate without physical presence on a trading floor. The Dubai stock market, which trades in more than one currency, and which plans to promote Islamic banking, could be a precursor of new investing models. We could see the rise of winners from new ethnic and geographical groups, without contemporary stock market infrastructure.

Who can predict the future with certainty? Anything can happen, and each of us may be taken by surprise. There are gradual and subtle trends, and there are earth-shaking discontinuities. However, most financial soothsayers will agree that the near-term future will be quite different from today!

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