On the first day of the week, Monday 16th September 2016, I learned how global finance is actually operating and happening in the market, by understanding the financial market overview, financial centres, market segments, asset classes, and financial service industry. In the market overview, business “distraction” is a common issue that businesses encounter in the market especially in crisis situation. One of market distractions is pier-to-pier landing, where it consists of both buyers and sellers only. In contrast, ideal financial market involves intermediaries in between the dealers, which normally incorporate regulations and standards, and higher cost.
As regards to pier-to-pier platform, it does not require any legal regulations, standards or institutions in order to run the business, merely it just needs a social network through technology. Other benefit of pier-to-pier business is simple and flexible method of agreement, which results in win-win outcome. One good example of pier-to-pier business is Uber, Uber induce disturbance in taxi industry. The reason is because Uber is able to offer a much cheaper price for passenger to travel from one place to another place with a straightforward procedure of agreement, than taxi.
Another related example is airbnb, in which airbnb acts as a market distraction to hotel industry. The picture below illustrate how the actual financial market overview is in the market.
Moreover, in second week I learned about research skills that are required as to provide credible information for investors to make investment decision. The research skills consist of fundamental analysis and ‘Top-Down’ and ‘Bottom-Up’ approach.
Regarding to fundamental analysis, there are two types of research; the first research is qualitative research, involving macro-environmental analysis, micro analysis, and capabilities.
While the second is quantitative research which contains key metrics, financial ratios, and NPV. Those figures are utilised to support investor in making decision to whether to invest, or not.
Subsequently, ‘top-down’ approach shows bigger picture to the investors,for example, the investor want to invest capital in a certain country, he or she will need to see the potential of that country first, once it is done, then followed by the asset allocation. Next, the investor will find out the macroeconomic variables and stock market indexes trends, such as GDP growth of the country, inflation, interest rate, and so on. Charting and technical analysis of previous years reports is highly used in this approach.
Lastly, the ‘bottom-up’ approach starts from micro to macro analysis; where this approach will be begun from determining a specific investment, and then fundamental analysis will be conducted thereafter.