Friday, July 4, 2008

Global Stock Markets; the difference

The inflation in tandem with spiraling oil price is taking heavy toll on stock indices in Indian as well as all the major global burses. The south bound journey of stock indices is continued all over. No one seems to know how long they will last or when they will bottom out! Individual investors are shaky to burn their fingers; institutional investors seem to have diverted their fund towards more rewarding commodity market where speculation in oil is high. This may be another reason for the oil price`s apparently sky bound journey. The recent declaration of Iraq to open up their oil fields to corporate sectors is likely to take time. In the mean time Saudi Arabia has promised to increase their output from this month but nothing seems to work. Every day the oil price is touching new high and so the inflation.

However, if we compare the different stock markets, we find that the countries which are commodity exporters are better than those economies which are net commodity importers. For example, the stock markets of Taiwan, China, India, Turkey, Thailand, Philippines, and Korea are not doing well in comparison with Russia, Argentina, Brazil, Malaysia, Indonesia and South Africa. Though both the groups are more or less equally under inflationary pressure and affected heavily by inordinate hike of crude price hike. The only difference between them is the first group is net importer of commodity and the other is commodity exporter.
Countries like India and Turkey, share more or less same position in global stock market ranking are suffering in the same way. Both the countries are big oil importers, their import bills are running around 5% of GDP. Neither of them exports any major commodity to absorb the oil import shock. Where as Russia and Nigeria, though under tremendous inflationary pressure, being commodity exporters are still holding up. However, history suggests whenever a single factor is ruling market behavior is not sustainable. So long the oil continues to move high it may, at last , after all what goes up that comes down too!

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