Seeking the balance
August 12th 2007 10:16
Anyone who shows some mild interest in investments would have heard of diversification as risk management and balanced portfolios.
"Don't put all your eggs in one basket" is basically the guidance point for investors, otherwise you will expose yourself to the highest risk possible. Once the basket drops, there may not be one intact egg at all. While there is a wide range of asset classes to invest but on the macro level, it seems that the global financial markets are dictated by US alone.
Nevermind the strong fundamentals existing in the local settings but as long as US sneeze the world catches the cold. Basically every market participant has to consider the power and the risk of US economy on the world.
We all have seen the recent global financial market havoc stemming from the internal problems of the world's largest economy. In Australia, despite the fundamentals are more tightly intertwined with Asia, especially China nowadays, US markets basically set the trend for the markets here.
Unfortunately, that is the way it is. You are either in or out.
Don't investors have the right to demand a balance macro environment?
The truth is that in a free market, like the index, the biggest and the best dominates.
The rise of China and India is an undeniable fact but it is still a long way to go before the two Asian giants could counterweight US financial power. There is still Europe and Japan but they are also subjected to the US market like anyone else.
China has a wild wild west sharemarket with regulations and audit still shaky whereas India, though a software powerhouse, still can't punch a weight with its current financial system. The only long term hope for a more balanced macro environment is China. Due to the infancy of the Chinese financial system and power, now is not the time yet but given that it has Hong Kong as a base and the continuation of global engagement with the awakened dragon, the day of having two mutually exclusive financial giants composing of US and China will soon arrive.
Then we wouldn't have to see panic in the markets as seen recently.
"Don't put all your eggs in one basket" is basically the guidance point for investors, otherwise you will expose yourself to the highest risk possible. Once the basket drops, there may not be one intact egg at all. While there is a wide range of asset classes to invest but on the macro level, it seems that the global financial markets are dictated by US alone.
Nevermind the strong fundamentals existing in the local settings but as long as US sneeze the world catches the cold. Basically every market participant has to consider the power and the risk of US economy on the world.
We all have seen the recent global financial market havoc stemming from the internal problems of the world's largest economy. In Australia, despite the fundamentals are more tightly intertwined with Asia, especially China nowadays, US markets basically set the trend for the markets here.
Unfortunately, that is the way it is. You are either in or out.
Don't investors have the right to demand a balance macro environment?
The truth is that in a free market, like the index, the biggest and the best dominates.
The rise of China and India is an undeniable fact but it is still a long way to go before the two Asian giants could counterweight US financial power. There is still Europe and Japan but they are also subjected to the US market like anyone else.
China has a wild wild west sharemarket with regulations and audit still shaky whereas India, though a software powerhouse, still can't punch a weight with its current financial system. The only long term hope for a more balanced macro environment is China. Due to the infancy of the Chinese financial system and power, now is not the time yet but given that it has Hong Kong as a base and the continuation of global engagement with the awakened dragon, the day of having two mutually exclusive financial giants composing of US and China will soon arrive.
Then we wouldn't have to see panic in the markets as seen recently.
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