Recently, we have been reading on political unrest in various major Asian Economies. Does politics and the stock markets have any relationship? Let us take a look at the returns of the major economies for the past year.
The Worst Returns in Asia
The worse performing stock markets in Asian markets are Malaysia, Taiwan and Thailand. The rest of the Asian stock markets during this period of time did significantly better compared to these three countries.
The Malaysia Problem - To Build or not to Build
The Malaysian market has been consistently ranked as one of the worst performing Asian stock markets for the past few years. This is despite it's good consistent economic growth and relatively cheap valuation. The rationale for this poor performance is perhaps due to a lack of confidence in the market judging from the capital control measures imposed by the Malaysian Government during the reccession days. The capital control perhaps have curbed the drastic fall of the economy during the reccession days . As a result, this has created a fear in international investors that similiar incidents will occur again in the future. The recent internal conflict in the government also created concerns to investors, questioning the sustainability of present economic policies.
Thailand & Taiwan - Corruption and Scandals
The darlings of the stock markets in 2003 has now became the bane of investors in recent years. Scandals and corruption allegations are spreading across these countries like wild fire. Thailand has ousted a prime minister and the present economy is akin to a captainless ship that is travelling across tricky currents. The threat to dismantle the country's two largest political party threatens to throw the Thai's political picture into disarray. Once again, the country will go to elections in October and hopefully, they are resolve this one year standoff once and for all.
Taiwan faces simliar problems with her president's family members being investigated for corruption. Citizen confidence to the current administration has plunged to all time low. Despite mulitple strikes and appeals, President Chen is determined to complete his term in year 2008 whether the people like it or not. Some of the citizens are resigned to wait till 2008 before they are able to elect a new administration.
Despite having some of the best valuations in the Asian markets, these markets are churning out the worse returns in one of the best period of the Asian Economic Boom.
Conclusion
Good governmance do have an impact on the stock market. Investors are creatures of comfort. They like stable and sound economies. They like government that lays their plans out clearly and not giving vague promises. The stock market is perhaps, a sound judge of the effectiveness of the government.
The overall market has been moving steadily upwards. We are now entering the traditionally weak month of September, so do expect some turbulence in the markets. After September, we should have smooth sailing uphill till the end of the year.
The Worst Returns in Asia
The worse performing stock markets in Asian markets are Malaysia, Taiwan and Thailand. The rest of the Asian stock markets during this period of time did significantly better compared to these three countries.
The Malaysia Problem - To Build or not to Build
The Malaysian market has been consistently ranked as one of the worst performing Asian stock markets for the past few years. This is despite it's good consistent economic growth and relatively cheap valuation. The rationale for this poor performance is perhaps due to a lack of confidence in the market judging from the capital control measures imposed by the Malaysian Government during the reccession days. The capital control perhaps have curbed the drastic fall of the economy during the reccession days . As a result, this has created a fear in international investors that similiar incidents will occur again in the future. The recent internal conflict in the government also created concerns to investors, questioning the sustainability of present economic policies.
Thailand & Taiwan - Corruption and Scandals
The darlings of the stock markets in 2003 has now became the bane of investors in recent years. Scandals and corruption allegations are spreading across these countries like wild fire. Thailand has ousted a prime minister and the present economy is akin to a captainless ship that is travelling across tricky currents. The threat to dismantle the country's two largest political party threatens to throw the Thai's political picture into disarray. Once again, the country will go to elections in October and hopefully, they are resolve this one year standoff once and for all.
Taiwan faces simliar problems with her president's family members being investigated for corruption. Citizen confidence to the current administration has plunged to all time low. Despite mulitple strikes and appeals, President Chen is determined to complete his term in year 2008 whether the people like it or not. Some of the citizens are resigned to wait till 2008 before they are able to elect a new administration.
Despite having some of the best valuations in the Asian markets, these markets are churning out the worse returns in one of the best period of the Asian Economic Boom.
Conclusion
Good governmance do have an impact on the stock market. Investors are creatures of comfort. They like stable and sound economies. They like government that lays their plans out clearly and not giving vague promises. The stock market is perhaps, a sound judge of the effectiveness of the government.
The overall market has been moving steadily upwards. We are now entering the traditionally weak month of September, so do expect some turbulence in the markets. After September, we should have smooth sailing uphill till the end of the year.
No comments:
Post a Comment