Saturday, July 13

Country stock indices are falling: causes of exchange fluctuations

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How country stock indices have behaved since the pandemic

This year has been a real test for the world. The coronavirus pandemic, the global crisis, oil price collapses. The world market is feverish, and the stock indices of countries are falling. At the last trades, shares of companies in the Asia-Pacific region showed a decline in the trend.
The stock exchanges reacted promptly to the results of OPEC+ transaction, which obliged the participants to reduce the volume of oil production. This decision is due to the low cost of raw materials and the prevalence of supply over demand. According to OPEC member countries, an agreement on the reduction of oil production will balance the market and stabilize prices. In addition, they recommend the states, which are not members of the association, also to support the initiative.
According to the new terms of the deal, the reduction of daily production in May and June was 9.7 million barrels, from July to the end of this year there is a limit of 7.7 million barrels, and from 2021 to May 2022 limits will be at 5.7 million barrels.
However, some analysts are skeptical about the new OPEC+ deal. In their opinion, countries have not reduced production enough, and at such values it is difficult to stimulate the growth of oil prices. The trend in sharp changes in demand for fuel is observed at 15-30 mn barrels per day, taking into account production in each country. Under current arrangements, it will be impossible to achieve a fundamental shift and stabilize the market.
Apart from the situation with oil, stock indices also react to other crisis phenomena in the world. The economies of many countries are still in a state of suspension after a rolling pandemic. Even those countries that are recovering have introduced tough measures and are forced to postpone reform and other actions that were previously planned. A prime example is Japan, which was actively preparing for the Olympic Games but had to postpone them by a year. Serious investments went into preparation, and now large companies incur losses.

The situation in the country is reflected in the stock markets – the Nikkei 225 index has fallen by 2%. The Topix index, which allows to analyze the picture more widely, fell by 1.3%. It should be noted that Nikkei 225 includes shares of large holdings, including Recruit Holdings and FamilyMart. The first company has already lost 7.2% of the value of securities, while the second – 6.6%. The price of Softbank Corporation fell by 2.4%, while Sony Corp fell by 2.2%.
The capitalization of the world’s largest manufacturer of electronic chips and equipment Samsung decreased by 1.4%, and its competitor SK Hynix lost 3.2%.
There is also a downward trend in the Chinese stock exchange. Shanghai Composite Index fell 0.5% and Shenzhen Composite fell 0.8%.
Korea’s Kospi Index shows a 1% decline.

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