【正文】 s (證券分析 ) (or Fundamental analysis (基本分析 )) – The analysis to determine values of firms, by predicting earnings and dividends with publicly economic and accounting information Three levels of security analysis – Global and domestic economic analysis (Ch 12) – Industry analysis (Ch 12) – Company analysis (equity valuation in Ch 13 and financial statement analysis in Ch 14) Why use the topdown sequence – Macroeconomic and industry circumstances might have a greater influence on profits than the firm’s relative petitiveness within its industry 123 International economic analysis (國(guó)際經(jīng)濟(jì)分析 ) – Illustrate the global economic risk, regional or country risks, and exchange rate risk Domestic economic analysis (本國(guó)經(jīng)濟(jì)分析 ) – Introduce key domestic economic variables – Interest rates analysis – Analysis of demand and supply shocks – Fiscal and moary policies (財(cái)政與貨幣政策 ) of the government – Business cycle analysis Industry analysis (產(chǎn)業(yè)分析 ) – Sensitivity of industry performance to business cycle – Sector rotation strategy (產(chǎn)業(yè)輪動(dòng)策略 ) – Life cycles of an industry (產(chǎn)業(yè)生命週期 ) The Goals of Chapter 12 124 THE GLOBAL ECONOMY 125 Global Economic Analysis Global economic risks (全球經(jīng)濟(jì)風(fēng)險(xiǎn) ) – Subprime and credit crises in 2022 (introduced in Ch 1) The subprime crisis in the . spreads over the world through MBS Credit crisis: Financial institutions worldwide lose much capital in the subprime crisis and stop the lending business due to the doubt of the credit quality of other banks and business firms – The economies of most countries are affected by the euro zone debt crisis in 2022 (see Slide 126) Stock markets in virtually all countries were deeply affected Different performance in countries and regions implies the existence of regional and country risks 126 Economic Performance, 2022 ※ There is considerable variation in economic performance across countries, ., BRIC countries (Brazil, Russia, India, and China) (raw material and huge market issues) vs. European countries (Britain, France, Germany, Greece, and Italy) (political and economic reasons) ※ Exchange rate risk (外匯風(fēng)險(xiǎn) ): due to the depreciation of the Mexico peso, the stock market return in . dollars is significantly lower than that in the local currency 127 Global Economic Analysis Regional or country risks (區(qū)域或國(guó)家風(fēng)險(xiǎn) ) – Asian financial crisis (亞洲金融危機(jī) ) in 1997 The boom of Thailand economy in 1996 and 1997 attracted international capital inflow (國(guó)際資本流入 ), which resulted in the highly sufficient currency supply (充足的貨幣供給 ) in Thai economy Thai banks extended credit to domestic firms beyond what Thailand could support, which resulted in serious depreciation of Thai baht and economic recession The international speculators attacked not only Thailand but also neighboring Asian nations, some with and some without characteristics similar to Thailand, like Indonesia, Philippines, Malaysia, South Korea, Taiwan, etc ※ These events in different nations highlighted the close interplay between politics and economics, and the currency value and stock market performance 128 Global Economic Analysis – Russian financial crisis (俄羅斯金融風(fēng)暴 ) in 1998 Since the establishment of Russian Federation in 1991, the serious inflation (通貨膨脹 ) and fiscal deficit (財(cái)政短缺 ) problems raged To support Russia, the West nations lent huge dollardenominated Eurobonds (both government and nongovernmental) to Russia Capital flight (資本逸逃 ) problem : The Russian current account (經(jīng)常帳 ) (there is a healthy surplus of $15 $20 billion per year) was not finding its way into internal investment – Russia could not accumulate foreign exchange reserves through the current account surplus 129 Global Economic Analysis After Asian crisis in 1997, falling global modity prices reduced the trade surplus of Russia since its exports were predominantly moditybased, ., oil sales were 45% of the amount of exports in 1997 With the deterioration in general economic conditions and the deficiency of currency reserves of the Russian Central Bank in August of 1998, the Russian ruble devaluated (俄羅斯盧布貶值 ) and Russian government rescheduled the payment of sovereign (government) debt – The political crisis in the early of 1998 is another reason for investors losing confidence on Russian ruble It was the first time that the government debt defaulted (政府公債違約 ) 1210 Global Economic Analysis Exchange rate risks (外匯風(fēng)險(xiǎn) ) – Affect the international petitiveness of a country’s industries and thus affect sales and profits of business firms and stock returns of investors The depreciation of the local currency will benefit exporters but hurt importers in that country The gains for the investment in foreign stocks may be enhanced or reduced after taking the exchange rate into consideration – The poorer performance of the stock market of Mexico in . dollars demonstrates the effect of the exchange rate risk could be substantial 1211 THE DOMESTIC MACROECONOMY 1212 Key Economic Variables Introduce some domestic economic variables – Note that one must forecast better than ones petitors to earn abnormal profits Gross domestic product (GDP, 國(guó)內(nèi)生產(chǎn)毛額 ) – The measure of the economy’s total production of goods and services – Rapidly growing GDP indicates