According to the financial globalization, which refers to the markets of countries that integrate with the rest of the countries of the world to become one financial market across these countries. The portfolio diversification in that countries purchase assets from other economies in that it is not related to the economy domestically. There are financial disturbance in which can’t be declined or removed such as the systematic risk of cross country as well as the domestic economy of a country is exposed to many are of instability such as the case of MENA countries. In the case of MENA countries, the impact of the financial disturbance seems to be severe. The economies of the Arab countries that export oils are reflected by the financial fluctuations globally and this is because of the changes in the oil prices while at the same time investing in the western countries.
In addition, the pegging of the US dollar with the other currencies of other oil producing countries except Kuwait results in theses countries are affected by the changes of the US dollar. In that a decrease in the US dollar value results in an increase in the domestic interest rate which also results in a fall in the real estate prices as well as bond prices. Also, as these countries depend of importing goods, a decline in the US dollar value results in an increase in the inflation of the imported goods. A number of countries in the region are happy with the financial surplus while ate the same time they can’t ignore the risk factors of the global assets on their economies.
On the other hand, around 65-70 percent of asset, which are related to these countries, are in US dollar as well as all the money earned from oil export are invested in western countries. In the last years, GCC economies have high economic diversification in order to reduce the exposure in the fluctuations in oil prices. All MENA countries are face by a geopolitical shock in a vital contributor to financial instability and that is because the political instability that are face by sub Saharan Africa and South Asia. Many strategic initiatives are needed because the MENA countries are affected by global factor risks and these strategic initiatives are needed to avoid geopolitical instability which is introduced by “Arab Spring”. The “Arab Spring” has been raised in MENA countries and create uncertainties according to the regional financial prospect in the future. As these mentioned countries are affected by political and economic shocks, that’s lead to both domestic and foreign investor have little incentive in invest in these countries. Additionally, investors are moving finds in outside the region. The international portfolio diversification of course have higher long term return than the domestic ones.
According to MENA countries that doesn’t export oil, are face by inefficient financial system and that the dollar return from investing in a foreign asset is higher than the ones offered in a domestic asset. However, the oil exporting countries, they are not concentrated in investing in Western Countries. Globalization of Markets and the Forces driving itGlobalization of markets refers to the merging different countries across the world into one single market. This process is conducted through identifying the sharing norms, culture, preferences, values in order to allow culture to use common products and services. Globalization of markets refers to global corporation and that the multinational corporation is going to disappear.
Where the global corporation operate at a low relative cost and it sell the same thing in the same way everywhere whereas the multinational markets is at higher cost and operate in multi countries and sell products depend on a specific country.There are many reasons that drive globalization of markets. First, the scale of industrialization is considered to be large which allow mass production. Second, a way the company use to reduce the risk through portfolio diversification. Third, it is a good way to serve the demand of foreign countries. Fourth, it is the best way for companies to go globalize in order to gain profit and achieve the goals. The global issues and their interrelationship with economic and politicsFinancial stability is one of the global issue that gives a great benefit to middle-income countries so enhance the economics of the country.
In that any country that has a good economic and financial stability will be also having good politics. So financial stability have a positive relationship with economics and politics. Another global issue is the international trade which provide a world integrated economy in that it is a way for growth as well as fighting the poverty through providing jobs in developing country. So international trade is positively associated with economics and politics Alternatives to an investor to mitigate the risk on investmentsAn investor can avoid investment mistakes through following investment strategies which might help in investor to mitigate the risk associated with investing. The first strategy is the asset allocation which means to weight the investment in you portfolio in order to achieve an objective. For example if your objective is to achieve a market growth, you may decide to invest 80% of your assets in stock and 20% in bonds. The second strategy is portfolio diversification which means make a multiple investments in each asset class. In order to minimize the investment risk.
For instance, purchasing stock in a number of companies rather than only one company which this will help you avoid the substantial loss. The third strategy is dollar cost averaging which means that purchasing more shares when the prices are low and purchasing fewer shares when prices are high in that the average cost of the shares will be lower and this lead to mitigate you from making wrong investment. Ways to minimize risk while investing in Qatar Stock MarketThere are different ways an investor can rely on while investing in Qatar Stock Market. First of all and the most important this is portfolio diversification through investing in shares in different companies and industries while this lead to minimize the risk in relative with return. For example, if you invest all your money in an oil producing company, this might lead to lose your money once the oil price drop down.
The second best way is to examine and understand the company that you are buying its shares through understanding the firm operation, the financials of the firm as well as the future outlook in order to be able to decide whether it is a good investment or not. The third way is to go for the long term when purchasing stock through holding the shares for a long time because if you are holding the shares for short time it is hard to predict how it is going on. The last way is that the investor should avoid emotional decisions making when you are making decisions regarding buying or selling stocks in that the investor should follow and stick to investment strategy. ConclusionIn conclusion, globalization of markets, which means to drive integration between countries, is a good issue, which will allow integrating the markets of countries in one market. Through globalization, this will enhance the economics of countries as well as the politics issue. In addition, portfolio diversification is a good issue in order for the risk reduction and mitigation.
There are a number of strategies an investor can follow them in order to mitigate the risk associated the investment and they are as follows, asset allocation, portfolio diversification and dollar cost averaging. An investor should stick to these strategies in order to make a good investment and to mitigate the risk. When in investor decide to invest in Qatar Stock Market he should first understand the organization that he is going to buy its shares from many sides in order to be able to make good decisions. In addition to that, investing in different shares from different companies and industries.