Financial markets in times of pandemic- magazine Economy and Business

 

author: Stojan Doneski

The emergence of the virus which rapidly spread all around the world over night has brought the world economies in recession. By definition, according to the traditional measuring, not a single economy has registered GDP decline, but the reality is that almost all developed economies are in deep recession already. Decline of the economic activity around the world is compared to the one of the high depression in the 30-ies of the last century. Following the initial shock from the virus and the extreme increase of infected persons, most of the countries in the past period were noting decrease in the of number of the newly infected, and thus the world would begin to return to normal, counting the losses.

Spreading of the virus, fear, measures for social distancing, limiting of movement, border closing and similar, had initially been mirrored in stock indices decline around the world and then in the global economic activity. Since the beginning of the crisis, the losses at the world stock indices went in negative figures ranging from 25 to 30 percents.

Problems with the production since the beginning of the crisis spilt over in extreme reduction of the demand, except the one for essential and pharmaceutical products and services. Continue reading “Financial markets in times of pandemic- magazine Economy and Business”

FX Forwards and their application- magazine Economy and Business

 

Vladimir Trajkovikj

Businesses that in their regular operation have import-export relations with foreign companies are exposed to currency risk permanently – risk against change of exchange rate, before all, due to extreme volatility of FX market.

Scope of the FX market is at the historically highest level and is incomparable with the scope of the remaining market instruments (stocks, corporate bonds shares etc.). High scope of trading is also resulting in high volatility of the FX market under terms of market uncertainty.

Change of prices at the foreign market may have significant influence over the cash flows of companies whose businesses are import-export dependable. Under circumstances when the businesses have liabilities or receivables in foreign currency to become due in near time or planned investments for which assets are to be allocated in near future, it is of extreme importance for the companies to mitigate the currency risk and protect against losses on the account of exchange rate differences. FX Forward, i.e. spot FX transaction is used as an extremely flexible instrument for dealing with the currency risk. Continue reading “FX Forwards and their application- magazine Economy and Business”

Time duration of transactions settlement- magazine Economy and Business

 

Sasho Trajkovski

For almost all of the banks which were researched in the G-10 countries group, the minimum exposure that the banks face in their individual transactions (regardless if these are spot or forward transactions), time duration of Status I lasts from one to two working days. This time duration of Status I relate when all the currencies are traded with, except Japanese Yens. Time duration of Status I in trading with Japanese Yens lasts up to three working days, counting from the day when the FEYCS members can sent irrevocable instructions for paying with Yens in the Japanese payment system[1] .

As supplement to this, time duration of financial transactions settlement is continued for additional one to two working days (time duration of Status U). As a result of the previously said, it would take more than three working days (if holidays and weekend occur between these three working days, the days would be much more) from the beginning of risk emergence that the banks are facing in its operation, containing in it the time necessary for complete transaction processing.

Seeing from the view point of the banks, with the settlement of purchased currencies before the settlement of currencies that were sold, they may face risk of not being able to cancel the currency they sell. In such cases, they are forced to pay out the currency they sold, even in cases when it is clear that they will not get the currency they agreed to. This case occurs mainly when transactions are concluded in zones of huge time difference.  It is best to use settlement system, which could make settlement of two currencies simultaneously[2] . Continue reading “Time duration of transactions settlement- magazine Economy and Business”

At the edge of recession? What are the leading indicators saying for the business cycle- magazine Economy and Business

 

author: Predrag Shapcheski

Economic indicators are statistical macroeconomic variables which assist in analyzing the phase in which the business cycle is. Agreed with the time when they take place, they give indication in which direction the entire economy is moving to. Due to the time specific features of the economic indicators, these can be leading, contemporary with the changes, or delayed. Leading indicators are the ones which change before the macroeconomic changes take place. Those are one of the most important indicators which assist the analysts and investors in their projections for the economy in future. Therefore precisely, the focus on this article is on those indicators.

During 2019 increased interest for discussion and analysis of the change in the business cycle emerged on world level. Economists are giving their opinions and projections throughout various media in view of the next recession. Should we expect it in the next quarters or has it already begun? There from, leading indicators are those which should give clear picture on the present situation in the world economy, and is it facing the expected recession. Leading indicators are numerous and they differ in different regions around the world, but still, some indicators are consistent everywhere. In continuation, considered are the stock market indices, range of interest rates and composite leading indicators as one of the most important.

Stock Market Indices

Monitoring the stock market share indices as are S&P500 (USA) and Euro Stoxx 50 (Europe) is important part in projecting the changes in the business cycle. This indicator is not the most important one, but is an indicator to be analyzed first by the investors, analysts and media. Share prices result largely from the expectations by the investors for the future, i.e. earned profit for the companies. If the assessment for the profit of the companies is correct, the indices may be good indicator for the direction of movement of the business cycle. Due to that, the indices value is the highest before the economy reaches its peak. Starting from 2009 up until today, the index S&P500 is permanently growing. In July this year it reached its peak of 3.083,82 USD. It can be easily considered through this index that the shares are with growing tendency. Until investors are satisfied with the profit from the companies, the index will be in upward line, and it is indicating that the business cycle is not yet on its peak. Still, monitoring of this indicator as a leading one has its failures. At the so called “bull” mood of the market, it is very difficult to predict the exact moment where the economy shall have its peak in the cycle.  Continue reading “At the edge of recession? What are the leading indicators saying for the business cycle- magazine Economy and Business”