QUESTION 1: MARKET CONTAGION It is said that global stock markets are intertwine
ID: 2711875 • Letter: Q
Question
QUESTION 1: MARKET CONTAGION It is said that global stock markets are intertwined/connected and that market performance in one part of the world could have fundamental impacts or influences on the markets in other parts of the world (contagion). This phenomenon was recently exhibited across the markets in Asia and the developed states in Europe and North America. Required: Provide an account of the performance of the major global markets in the last 3 months to date, commenting of how stock markets performance in Asia impacted on the stock markets in Europe, North America and to an extent markets in Africa (at a secondary level). Clearly outline the reasons that were responsible for the stock market declines (fall in stock market indices). 10 marks
QUESTION 2: OMEGA Study of Investment Analysis and Portfolio Management is a specialised area of study that is aimed at maximising return given a level of risk. The principles of Investment Analysis and Portfolio Management have broadly been applied by large corporates. However, these principles can equally been applied at a personal level. Required With the help of a clear example, give an account of how the principles of Investment Analysis and Portfolio Management can be applied at a personal level to maximise return. 10 marks
Explanation / Answer
II. There are two basic principles of portfolio management. They are:
1). Investment planning for investing in securities by considering :
- Fiscal and monetary policies of government and the central bank
- Industrial and economic environment and its impact on industry
2). Constant review of the Investment by carrying out the following analysis:
- Assessment of management quality
- Financial and trend analysis of companies to identify sound companies with optimum capital structure and better performance and to disinvest where performance looks bad
- The continous analysis of securities market and its trend