Explain how global markets work. What are the MSCI categories for equity markets, discuss them in detail and name 3 markets from each category and brief about them. 10 marks

ANSWER

Explain how global markets work ?

Global markets are financial markets that bring buyers and sellers together to trade stocks, bonds, currencies, and other financial assets. Capital markets include the stock market and the bond market. They help people with ideas become entrepreneurs and help small businesses grow into big companies. They also give folks like you and me opportunities to save and invest for our futures.

The MSCI Indexes are a measurement of stock market performance in a particular area. Like other indexes, such as the Dow Jones Averages or the S&P 500, it tracks the performance of the stocks included in the index.

MSCI CATEGORIES

MSCI Emerging Market Index

The Emerging Markets Index tracks the performance of stock markets in the following 26 developing countries: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey, and United Arab Emirates.? The MSCI Kuwait Index will be included in the MSCI Emerging Markets Index beginning November 2020.?

In June 2017, MSCI Inc. announced it was adding over 200 China A-shares. Those shares are listed in Shanghai and Shenzhen and denominated in yuan.? As a result, all exchange-traded funds that track the MSCI index were forced to add those shares.

Saudi Arabia is also included in the Gulf Cooperation Council Country Index.?

The index compiles the market capitalization of all companies that are listed in these countries' stock markets.7? The index is considered a good measurement of the stock performance of emerging markets.

MSCI Frontier Markets Index

The Frontier Markets Index tracks the stock markets of countries which are even more volatile than emerging markets. It was created in 2007. The countries in the Index are Bahrain, Bangladesh, Croatia, Estonia, Jordan, Kazakhstan, Kenya, Kuwait, Lebanon, Lithuania, Mauritius, Morocco, Nigeria, Oman, Romania, Serbia, Slovenia, Sri Lanka, Tunisia, and Vietnam. That also includes the West African Economic and Monetary Union. It consists of the following countries: Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal, and Togo. Currently, the MSCI WAEMU Indexes include securities classified in Senegal, Ivory Coast and Burkina Faso.

The following frontier countries are in their own standalone country indexes. They aren't included in the Frontier Market Index: Bosnia and Herzegovina, Botswana, Bulgaria, Iceland, Jamaica, Malta, Palestine, Panama, Trinidad & Tobago, Ukraine, and Zimbabwe.

Frontier markets can also very profitable since they have lots of room for growth. The main risk is that they are very thinly traded. This makes them difficult to sell if the economy deteriorates. It also means they can more easily be manipulated by hedge funds. You need to understand the countries, their political systems, and their economic challenges. These countries are vulnerable to global shifts in trade, currency, and central bank policy changes.

MSCI EAFE Index

The EAFE Index measures developed markets excluding the United States and Canada. EAFE stands for Europe, Australasia, and the Far East. It covers 85% of the market capitalization in each of the countries.

The MSCI EAFE Index consists of the following developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom