Normalisation of monetary policy could impact global stocks, expert cautions

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Normalisation of monetary policy could impact global stocks, expert cautions

By   PHUWIT LIMVIPHUWAT 
THE NATION 

 

Pornchai

 

STOCK prices could take a hit if there is a reduction in global money supply, Pornchai Prasertsintanah, Thailand’s country manager and head of South Asia Equities of Credit Suisse Securities (Thailand) Ltd, said.
 

In the next two to three years, the global money supply will be the most important factor in influencing the change in global stock prices, Pornchai said at an annual press interview. 

 

“From 2008 to today, there has been a significant increase in global money supply, which is one of the key factors pushing up global stock prices and asset prices”, he explained. “Hence, if there is a reduction in the global money supply, it will have a big impact on stock prices.”

 

Credit Suisse is one of Thailand’s top foreign institutional brokers, a leading investment bank in Thailand as well as a wealth management firm. It established itself in Thailand in 2000 and led Thailand’s first-ever concurrent convertible bond offering and equity placement in 2017. In the past 10 years, Credit Suisse has completed 27 equity and equity-linked transactions, raising US$9.1 billion for Thailand-listed companies. 

 

“The biggest swing factor in global money supply in the past five to six years has been the role of the government in different countries. Governments are trying to normalise their monetary policy, which has been ‘super easy’ since the 2008 global financial crisis. I believe this will be the most important factor influencing stock prices in the coming years,” said Pornchai. 

 

Normalisation in monetary policy will involve an increase in interest rates, which will decrease money supply in the economy, which in turn will lead to a fall in stock prices. 

 

Speaking about the global trade war, Pornchai warned investors to be more on the cautious side in the next 12 months. There is a high level of difficulty in forecasting what the trade policies of the US and China will be, hence it constitutes a risk factor investors should be aware of. 

 

“Despite this worry, we think the trade war is more of a negotiation game,” he said. “All parties involved in this trade negotiation want what is best in the economic interest of their respective countries. Hence, both sides will eventually settle for negotiations and avoid an all-out trade war.”

 

Pornchai said that despite these geopolitical risks, there were promising prospects for economic growth and stock market stability for the rest of this year. However, he said there would be a higher risk for investors with regard to the stock market next year, as trade wars often have a lagged effect on the economy.

 

Meanwhile, the Stock Exchange of Thailand (SET) has been performing relatively well with increased investments in new types of bonds as well as investments abroad, Pornchai said. Various investors in Thailand are becoming more interested in investing abroad. Since 1997, Thailand’s government has been implementing capital control measures and gradually loosening the extent of control over capital flowing out of the country, according to Pornchai.

 

As Thai investors have mostly been investing in Thailand, a large portion of their total investment capital is in Thailand. Therefore, Thai investors are now looking to invest in foreign markets to diversify their risks and to capitalise on profit opportunities in foreign emerging markets, he says.

 

This growing interest to invest abroad has led to the purchasing of new investment instruments such as perpetual and convertible bonds in Thailand’s stock market, said Pornchai. 

 

Source: http://www.nationmultimedia.com/detail/Economy/30354149

 

-- © Copyright The Nation 2018-09-11

 

[AsiaHand]

WOW ! Did you figure that out by yourself or did a twelve year old student in a UK or US help you in those figures ? Also you forgot to add that all those people buying collector cars in California and London this month will see their investment take a loss  Have you been offered a position in one of the "Think Tanks" on economics in the EU ? WOW

Edited September 11, 2018 by AsiaHand

[Krataiboy]

"Many people would be surprised to learn that even among bankers, economists, and policymakers, there is no common understanding of how new money is created". - The New Economics Foundation.

 

Not those of us still licking our wounds after the 2008 crash.

 

But the banking frat sure knows how to spend the digital funny money they create on computers - and how to mop up the juicy bits and pieces left after a financial meltdown for pennies on the pound.

 

A decade has flown since they last cashed in their worthless chips and almost destroyed the world financial system. Watch this space. . . 

Edited September 11, 2018 by Krataiboy

[connda]

Translated: We've been printing money and buying equities in order give the illusion of prosperity.  Tho 1% who were in on the gig are wealthier than every.  If we let this bubble burst, the wealthiest of the wealthy will take a hit.  Therefore the ponzi scheme must be extended. 

[chilli42]

1 hour ago, Krataiboy said:

"Many people would be surprised to learn that even among bankers, economists, and policymakers, there is no common understanding of how new money is created". - The New Economics Foundation.

 

Not those of us still licking our wounds after the 2008 crash.

 

But the banking frat sure knows how to spend the digital funny money they create on computers - and how to mop up the juicy bits and pieces left after a financial meltdown for pennies on the pound.

 

A decade has flown since they last cashed in their worthless chips and almost destroyed the world financial system. Watch this space. . . 

I am willing to bet that most of the TV users equally have no clue how money is created.  Many still think the the government “prints” money.  Frightening when you see the willingness to dismantle the Dodd Franks act.

[Rhys]

..the easy way.. just photocopy more ... A sterling insights by the T Scholar

[manarak]

2 hours ago, Krataiboy said:

"Many people would be surprised to learn that even among bankers, economists, and policymakers, there is no common understanding of how new money is created". - The New Economics Foundation.

yup.

the reason for that is many bankers and policymakers didn't study finance, but are then given the reins of some of the largest financial institutions.

but they have good hair, so it's gonna be ok.

 

 

[AlexRich]

The Fed Chairman is increasing interest rates whilst engaging in quantitative tightening, at the same time as dotard Trump is erecting trade barriers and juicing up the stock market with tax cuts for the rich, and increasing the level of US debt. 

 

At at some point we’ll be in a global recession ... the bull run normally ends in euphoria ... not quite there yet.

[Krataiboy]

2 hours ago, chilli42 said:

I am willing to bet that most of the TV users equally have no clue how money is created.  Many still think the the government “prints” money.  Frightening when you see the willingness to dismantle the Dodd Franks act.

If only governments could print money - as was the case in bygone days. At least they would be accountable. The Dodds Frank act, of course, was brought in to muzzle the wolves of Wall Street, though some of its provisions were adopted internationally. With wheeler-dealer Trump at the helm the rolling back process you mention, which started in May is likely to continue, with predictably disastrous results.