Actions

  Print Article
  BookMark Article

Categories    Category List

  Advice
  Aging
Arts
  Arts And Crafts
  Ask An Expert
  Automotive
  Banking
  Break-up
  Budgeting
Business
  Business Management
  Cancer Survival
  Career
Cars And Trucks
  Casinos
  Causes And Organizations
  Cell Phones
  Cheating
  College And University
Computers
  Computers And Technology
Cooking
Crafts & Hobbies
  Culture
Culture And Society
Current Affairs
  Dating And Relationships
  Death
Disease & Illness
  Domain Names
  Drop Shipping
  E-Commerce
  Electronics
Entertainment
  Environment
  Etiquette
  Ezines And Newsletters
  Family Concerns
Fashion
  Fiction
Finance
  Finances
  Financial Planning
  Food And Drinks
  Forums
  Gadgets And Gizmos
  Gambling
Gardening
Health & Fitness
Home
Home & Family
  Home Business
  Home Improvement
  Home Management
  Human Resources
  Import Export
  Infants And Toddlers
  Innovation
  Inspirational
  Insurance
  Intellectual Property
Internet
Internet Business
  Jobs
  K-12
  Medical Business
  Medicines And Remedies
Men Only
  Motivational
Motorcycles
  Nature
  Opinions
Our Pets
  Personal Development
  Pets And Animals
  Podcasting
  Pregnancy And Family Pla
  Presentation
Product Reviews
  Quotes
  Recreation
Recreation & Sports
  Recreation And Leisure
Reference & Education
Relationship
  Religion And Spiritualit
  Screenplay
  Search Engines
  Self Help
Self Improvement
  Selling
  Shopping
  Short Stories
  Society
  Speaking
  Sports
  Structured Settlements
  Supplements And Vitamins
  Team Building
  Technology
  Telecommuting
  Telesales
  Television
  Tools & Resources
  Travel
Travel & Leisure
  Video
  Web Development
Weddings
  Wellness, Fitness And Di
  Womens Interest
  Work Life Balance
  World Affairs
Writing & Speaking

Online Now    Online Now

Guests Online (128)

Baiduspider (2)

Bing (4)

Googlebot/2.1 (3)

Bing (1)

Baiduspider (1)

SoGou (China) (1)

Author Login    Author Login

Welcome Guest! Please login or create an account.

Username:

Password:



If you do not have an account yet, you can register ( Here ), or you may retrieve a lost user/pass ( Here ).

Navigation    Navigation

   10 newest articles RSS

Author Highlights    Featured Author

Moali Naualipoly
alaska

View My Bio & Articles


Jude Noronha
NOT PROVIDED

View My Bio & Articles


Edz S
manila

View My Bio & Articles


DisclosureDisclosure

You should assume that the owner of this website is an affiliate for the provider of goods/services mentioned on this website. Sometimes the owner may get paid a commission if you purchase the product when following a link.

Cyclical Argument For Equities In Serious Question Today

Author : Rakesh Saxena

Submitted : 2008-10-23 00:00:00    Word Count : 635    Popularity:   13

Tags:   cyclical, equities, downturn, slowdown, global economy

Author RSS Feed   Author RSS Feed

Recent facts from the emerging markets demand that American corporations conduct a fundamental review of the nature, quality and behaviour of their offshore assets. And stock analysts recommending long positions in American companies with significant overseas income flows need to recognize that the cyclical case for equities is no longer a valid proposition. In brief, economic conditions in Latin America, Asia and Africa are guiding profound political changes which, in turn, are influencing new legislation (as opposed to mere policy statements) governing asset ownership, profit repatriation, production margins and currency controls.

What impact will these legislative changes have on corporations (like GE, C, AIG, BA, COP, CVX and RDS) whose investments in the developing world are critical to their business models? And if there is nothing cyclical about this trend towards socialism-oriented legislation, is a radical shift in the methodology applied to equity valuations overdue today?

Latin America has been leading the charge in redefining the role of American and other foreign capital in domestic economies well into the next decade and beyond. Due primarily to the failure of sixty years of anti-poverty initiatives, Rafael Correa (Ecuador), Evo Morales (Bolivia) and Daniel Ortega (Nicaragua) are now firmly in the Hugo Chavez-Fidel Castro camp, with a few more major Latin American politicians on the fringes. The message from the continent, to anyone who is listening, is fairly straightforward: proceed to implement laws which dramatically curtail the freedom of private capital, particularly foreign capital, to influence the upgrading of national assets and the distribution of profits generated from those assets.

Another perspective on the methodology to be applied to American equity valuations can be obtained from the state of the political risk insurance marketplace. In certain instances, like energy assets in the Gulf of Guinea or off the coast of Somalia, risk insurance is now simply unavailable. In certain other instances, like for a variety of assets located in South Africa and India, political risk insurance coverage can only be obtained on a year-by-year basis, mainly due to concerns that the state of the domestic economies might force new nationalization-type regulation in the foreseeable future. Then there are instances, like Pakistan, Bangladesh, Iraq, Iran, Burma and Zimbabwe, to name just a few examples, where the mere mention of political risk insurance invites nothing but laughter (and scorn) in risk placement dealing rooms.

It should be pointed out that political risk insurance rates bear, at best, a minimal relationship to credit default swap quotes for emerging market sovereign bond issues. The former are indicators of specific asset (business) risks, while the pricing of the latter usually incorporates only the prospects of a country reneging on its debt service obligations.

Like corporate credit, political risk insurance remains frozen for the moment. But what the political risk marketplace has certainly acknowledged in recent weeks is that political movements firmly rooted in social conditions carry with them the real potential for sweeping constitutional amendments. Unlike in the second half of the 20th century, when Latin American armed revolts were unable, with the exception of Cuba and Nicaragua, to achieve any level of government control, the modern-day political movements are engaging the electoral process, and winning. How should the new reality influence corporate valuations?

To further complicate emerging market asset valuations, far forward (medium and long term) currency risk-offset providers are hesitant to enter into any fresh commitments unless the crisis in counterparty risk shows signs of resolution; in fact, certain reports suggest that many American corporations are unable to obtain even short-term foreign exchange risk coverage.

The first task is not how to value equities in the changed international environment but whether the changes in that environment are cyclical, or non-cyclical, in nature.

Author's Resource Box

Rakesh Saxena is a pricing and risk analysis specialist in insurance and derivative products and has extensive deal making in the emerging economies. He can be reached at derivatives@shaw.ca. Home URL: http://www.quoteplatform.com

Article Source:
www.1ArticleWorld.com

 

  Report Article
Badly Written Offensive Content Spam
Bad Author Links Mis-spellings Bad Formatting
Bad Author Photo Good Article!