Low Degree of Macro-Economic Volatility - BRICS Nations

In a study we observe that the positive growth effect on the real sector is reaped out from the financial integration in terms of integration of the financial markets (stock markets) among the BRICS nations. The fundamentals of the economies in the sample are attracting the foreign investment from among the nations in sample. Financial integration allows the capital to be invested in the market which is to give the highest return by reducing the barriers, hence the investors have the incentive to invest and consequently the entrepreneurs also gets the incentive in investing technological innovation. The ever expanding cross country capital flow in equity market is improving the production structure of the economies and influencing the growth of the real sector positively. Factors that fosters the investing in BRICS nations is the low degree of macro-economic volatility relative to the rest of the world. The growth rate of Brazil, China, South Africa and India is quiet high relative to the global market growth rate, especially aftermath of the crisis of 2008.

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Related: What Could Bring Volatility Back to the Stock Market

The global financial market has become very synthetic in terms of volatility. The member nations of BRICS nation have much more transparency of information and less asymmetry of information about the economy fundamentals and with regard to projects they are investing, since the financial intermediaries have easy access to all kind of information regarding the projects and economy fundamentals. So to reduce the uncertainties of investment the investors of BRICS nation are opting for cross-country investment within and between the BRICS nation. The positive impact of economic growth is found from the analysis, implies that the fundamental endowment of the BRICS nations are almost equal therefore, consequently the growth is taking place in terms of equalization of factor prices.

Daily changes, 10-year and 25-year averages of the main stock market indices like JSE/FTSE, IBOVESPA, BSE Sensex, RTSi can be followed on www.glarius.com

Related: Should You Add BRICS to Your Portfolio? - Nasdaq.com

Mr. Panchanan Das
Professor of Economics, University of Kolkata
Kolkata, West Bengal, India

Divergence Between Stock Market Performance and Real Economy Trends

by Panchanan Das
 
India - Many economists believe that significant decrease in stock prices could be source of future recession, whereas large increase in stock prices may reflect the expectation towards future economic growth. However, there were controversy issues to doubt the stock market’s predictive ability such as the 1987 stock market crashed followed by world recession and the 1997 Asian financial crisis. Daily BSE Sensex movements can be followed live on Glarius Investments Intelligence Platform. www.glarius.com

While the Sensex, as of any other stock or share price index, is conventionally treated as an indicator of economic performance of an economy, it can only be the gross indicator of an economy like India both statistically as well as conceptually. This is because the movement in share prices is guided by the expectations about the future performance of companies listed on the stock exchange. Here we enter in the field of Markets Intelligence. Movements in share prices may indicate economic health, but it could not predict properly the performance of the real sector. Glarius (www.glarius.com) has tools to monitor performances of Indices worldwide. Performance, yields of the last 25 years. Also, we have a tool to predict future movements in Indices. GLARIUS PROGNOSIS TOOL. 

There is a divergence between stock market performance and real economy trends. The stock markets seem reasonably function well even if the real sector not performing so well. This is because the Sensex is a stock market index representing the movement in the share price of major companies listed in the Mumbai Stock Exchange.

Mr. Panchanan Das is an Economics Professor at University of Kolkata Kolkata, West Bengal, India