Herd Behavior – Driven by Market Share 0 498

By : Kenneth De Zilwa

  • Global stock markets are strongly correlated to each other and this makes any financial  contagion rather predictable and broad based.Herd Behavior - 01
  • From Asian Markets to the European Markets investors find their collective behavior of chasing earnings leading to a herd mind set. This mind set can be both good and bad, in fact more exemplified when the bad unfolds as many tend to sell out pushing a rapid fall while short selling adds to the avalanche effect
  • Over the past year the stock markets have declined
    • S&P –US by 10.14%
    • FTSE-UK by  0%
    • Nikkie-Japan- by  78%
    • DAX-Germany by  0%
    • CSE –Sri Lanka by 6.07%
  • Therefore, 2019 we feel could be a year where markets correct lower, as  corporate earnings and higher debt on many corporate balance sheets  makes it a challenging time for markets.

Herd Behavior - 02

  • Our advice is to stay in cash and watch for value stocks , as the market will provide the opportunity  given the  business cycle

 

Leave a Reply

Your email address will not be published. Required fields are marked *

Sri Lanka in a Transforming South Asian Economic Landscape (Data as at 2018) 0 852

SL in Transform

 

  • India remains the Global leader and among the fastest growing economies of the world with a population of 1,316 Mn and USD 2,689 Mn.
  • Bangladesh with 162 Mn people with a GDP of USD 286 Bn has also sustained high economic growth in recent times.
  • Pakistan With a population of 199 Mn people and economy of USD 306.0 Bn GDP has slowed down its growth momentum, but remains a potentially important player in the region.
  • Nepal with a population of 29 Mn and an economy of USD 28 Bn sustains 6 percent growth in GDP in its transition to a lower middle income country.
  • Bhutan and Maldives with smaller in terms of population as well as GDP sustain near 7 percent growth in their respective GDP. Maldives commands the highest per capita income status in South Asia  while Bhutan commands one of the happiest country in the world,
  • Sri Lanka with 21 Mn people and a GDP of USD 92 Bn have lost its growth momentum and its development drive in recent years although it is still commanding the highest per capita income of around USD 4,000 in South Asia next only to Maldives.
  • Afghanistan with 30 Mn population remains as one of the poorest economies in the world with 2.5 percent growth in GDP and South Asia.   

 

Source : IMF – World Economic Outlook 2018 and Country Economic Updates
Source : IMF – World Economic Outlook 2018 and Country Economic Updates

By: BiZnomics Special Economic Correspondent

Bilateral Free Trade Agreements: Are we on the Right Track? 0 512

The process of Sri Lankan policy reforms of liberalisation since 1977 has been predominantly unilateral. These reforms were undertaken in a global context of multilateral trade and tariff reforms under the guidance of international organizations like GATT and WTO. In addition, Sri Lanka joined in the efforts of liberalisation at regional level, e.g. the South Asia Free Trade Agreement (SAFTA) under SAARC initiatives. Multilateral and even regional trade negotiations however, have proved very slow and cumbersome. Bilateral and preferential trade agreements have become attractive globally, as well as in Sri Lanka.

The first experience of post-independence Sri Lanka in bilateral trade agreements was the well-known Rubber-Rice Pact of 1951 between Sri Lanka (then Ceylon) and the People’s Republic of China. It was a simple bilateral bartering agreement which provided a win-win solution to the two participating countries. The recent Sri Lankan interest in pursuing bilateral and preferential trade agreements can be traced to the 1990s. Three FTAs have been signed and implemented since then. The India-Sri Lanka Free Trade Agreement (ISFTA) was signed in 1998 and entered into force in March 2000. The Pakistan-Sri Lanka Free Trade Agreement (PSLFTA) came into force in June 2005. The Sri Lanka Singapore Free Trade Agreement (SLSFTA) was signed and made effective in 2018.

The ISFTA and PSLFTA are simple agreements covering the trade of goods between the respective partner countries. The SLSFTA in contrast, is a comprehensive agreement covering trade in goods, sanitary and phy-to-sanitary measures, and technical barriers to trade, customs procedures and trade facilitation, trade in services, telecommunications, E-commerce, government procurement, foreign investment, competition, intellectual property rights, transparency rules and matters of economic and technical cooperation. Sri Lanka may choose to negotiate its future FTAs in the same format as that of the SLSFTA. The new FTAs would then be comprehensive/deep agreements. Such ‘deep’ FTAs influence border-related policies as well as beyond-the-border policies. Liberalization through bilateral FTAs is being given priority with multiple objectives.

Several issues must be raised on this declared approach of expanding the policy scope of FTAs. A fundamental issue is that FTAs, particularly comprehensive FTAs, restrict the policy autonomy of the government to a significant extent. In today’s global institutional and organizational structure the policy autonomy of a small country is no doubt extremely limited. It may be for good reasons that the policy makers in Sri Lanka opt to get their policy autonomy further constrained by a series of FTAs. Here the opinion makers in the country seem to demand the following. The reasons for signing an FTA ought to be transparently shared with the public. Adequate research ought to be conducted to establish that any envisaged FTA would generate net positive benefits to Sri Lanka. Further the feasibility of the envisaged FTA should be carefully examined without rushing into signing. The planned FTAs are to be signed with countries with greater experience and equipped with better institutions. If adequate care is not taken, the signing of an FTA could produce extensive adverse effects on the country’s development efforts.

”From an overall point of view, Sri Lanka, as it stands today, is in an extremely weak competitive position in the global economic set up”

There are many needed domestic economic reforms. Some of these could lead to further liberalization. At the same time, there could also be critical intervention by the state in some fields. Before envisaging any more FTAs, priority must be accorded to domestic policy reforms based on a coherent national development framework and a widely-accepted national foreign trade policy.

There is another danger in the current declared policy of moving toward two more FTAs and a comprehensive agreement with India, in addition to the three FTAs currently in force. FTAs are not the best way to improve Sri Lanka’s competitiveness or productivity which is constrained by various structural and institutional factors. None of these factors can be resolved by entering into FTAs. In addition, operating a number of FTAs with different countries, involving multiple Rules of Origin, can make the foreign trade system extremely complicated, distorted and cumbersome.

Sri Lanka does not yet have a firmly established institutionalised procedure within which international trade agreements, particularly those so-called comprehensive agreements, can be negotiated and implemented. Strong legal, regulatory and institutional frameworks are needed if the national interest is to be safeguarded in the process of negotiation and implementation of bilateral preferential FTAs. Entered into without due care, bilateral trade agreements could turn out to be, in the long run, contractual traps with obligations, without worthwhile advantages to gain.

BY: ECONSULT