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| Monday, October 13, 2008 |
| Equity Analysis |
As the stock market or equity market is keep falling, if you are still want to enter the stock market, you have to do some research or even understand some basic theory regarding the equity analysis.
I remember few months ago, there is a post in this blog, which was saying that, to analyse the equity, there are three steps which is better to follow:
1. Global Economy analysis
2. Industry
3. Equity (or stock)
Let's discuss about the first step, global economy analysis,
i.Country Analysis:
Expected real economic growth is the most important variable to analyze in a country analysis because it has the most significant influence on the risk and returns in national equity markets. Analysts are interested in forecasting expected economic growth in the short run and long run.
--In the short run, the focus is on forecasting the stage in the business cycle and therefore expected short-term economic growth.
--In the long run, the focus shifts to expectations of sustainable economic growth as measured by growth in per capita gross domestic product (GDP).
ii. Business cycle:
The short-term goal in identifying the current stage in the business cycle is to forecast the turning point when the economy moves from one stage to another and the invest in those sectors or inductries that are expected to perform best during that stage. In most cases this is difficult to do with any degree of success, which is why analysts most often focus on long-run forecasts of sustainable economic growth. Howvere, there are oppportunities to earn excess risk-adjusted returns for the anakyst who can identify and exploit the various stages of the business cycle than others can.
There are five stages of the business cycle abd potentially attractive investment opportunities at each stage are shown in the figure below:
It seems like we are in between of "Economy slow down and recession", as shown, we are not adviceable to throw in our $ into the Stock market, rather, we should focus on Interest sensitive investment. |
posted by NOSNIM™ @ 8:39 AM  |
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