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Chapter 32 Who does capital move for (2)
In financial markets, this manifests itself as a balance between demand and supply between the parties to the transaction.The quantity supplied and demanded when prices adjust to balance supply and demand is called the equilibrium quantity, and this is determined by the interaction of demand and supply.The equilibrium mechanism of the international financial market is that, without considering constraints such as transaction costs and information costs, securities or assets with the same characteristics do not benefit from international capital flows. At this time, the international financial market is in a state of quiescence. state of balance.

If the final return on investment is inconsistent with the capital, the international financial market will lose its balance and capital flow will occur.In fact, under the conditions of an open economy, the direction and scale of international capital flows are unpredictable. If a country’s economic foundation, financial regulatory measures, or financial market construction are not compatible, it may cause financial risks and cause serious financial risks. It may be contagious and expand into an international financial risk.In other words, the equilibrium of the international financial market is easily broken.Factors such as the subjective expectations of international financial investors, investment transaction costs, speculation, and a country's own financial market conditions can cause the international financial market to lose its equilibrium, resulting in erratic international financial capital flows.Therefore, under normal circumstances, the international financial market often presents a non-equilibrium state.This is one of the reasons why financial turmoil occurs repeatedly.

At the same time, the instability of the international financial system is also an important reason for the imbalance in the international financial market.The two world wars knocked down Britain, the so-called "empire on which the sun never sets", forcing the pound to withdraw from the stage of history and be replaced by the dollar.Since the creation of the Bretton Woods system, the US dollar has become the global settlement currency.And this global settlement system based on a country's currency will repeat the path that the pound has traveled, that is, it has become unstable due to changes in the country's economy, gradually causing turmoil to the global financial market.

From a historical point of view, it is almost impossible to maintain the equilibrium of the international financial market for a long time.Because a truly fair and reasonable international financial system must have a unified monetary unit that transcends all countries.However, this is only an ideal state. Just as "Esperanto" has not been widely used in the world, it is difficult for such a unified currency to exist.The diversification of reserve currencies cannot fundamentally resolve the predicament, but only disperses the contradictions.Such as the birth of the euro, the large exchange rate changes among the three major reserve currencies of the US dollar, the euro and the yen are more likely to cause financial market turmoil.It is difficult for an economy to accept frequent shocks from large fluctuations in exchange rates.Therefore, even with the weakening of the US dollar, many developing countries still maintain the exchange rate system pegged to the US dollar and use the US dollar as the main reserve currency.

Therefore, in order to achieve long-term international monetary equilibrium, we need to reform the fundamental constraint of the international financial system in order to promote macroeconomic and financial stability and achieve the goals of global economic growth and global poverty reduction.

Transaction costs of "money"
Stamp duty occupies a large proportion in the cost of securities transactions in our country, which is much higher than the level of commission.Roughly calculated, stamp duty accounts for more than 50% of transaction costs. On May 2007, 5, the stamp duty rate was increased from 30/[-] to [-]/[-], and the cost of securities transactions was further increased.

Compared with other countries, it should be said that the stamp duty rate for securities transactions in China is quite high.According to estimates, the annual income from stamp duty in 2007 was about 2000 billion yuan, equivalent to 2006 times that of 10.82, and higher than the total amount of dividends issued by the A-share market in 2008.

In other countries or regions, especially in countries or regions with mature capital markets, the stamp duty rate is very low.

Hong Kong plans to reduce stamp duty to zero.Because, in the world, lowering stamp duty is a trend.This is because the prosperity of the secondary market is very important to the development and growth of the entire capital market.Especially for China, the significance is even more significant.The reduction of transaction costs will help create market prosperity and improve the efficiency of asset allocation.We should start from reducing transaction costs and improving the operating efficiency of the capital market, so that every investor can enjoy the benefits of low tax rates.

Stamp duty is an integral part of transaction costs in financial markets.

Transaction costs refer to the time and money spent in the financial transaction process, which is a major problem faced by investors with excess funds to lend.For example, a carpenter Zhang needs 1000 yuan to buy new tools, and Xiao Huang has excess funds and is willing to lend him a loan. In order to make investment activities safer, Xiao Huang hires a lawyer to draft a loan contract, stating that Zhang needs to pay How much interest, when the interest is paid, and when the principal of 1000 yuan is returned.But to get such a contract, you need to pay 500 yuan.Therefore, when Xiao Huang calculated the transaction cost of this loan, he found that he could not get enough benefits, because he needed to pay 500 yuan, and the possible income was only 100 yuan, so Xiao Huang reluctantly rejected Xiao Zhang and asked him to Try your luck elsewhere.

In Chapter 6 of this book, we have stated that it is mainly financial intermediaries that reduce the cost of market transactions.

Because of high transaction costs, small savers like Xiao Huang and potential borrowers like Xiao Zhang may be locked out of financial markets, making it difficult to profit from them.

Financial intermediaries can greatly reduce transaction costs, for example, banks know how to find a good lawyer to draft a tight loan contract that can be reused in their lending activities, thus reducing the legal cost per transaction .Instead of paying $500 for one loan contract (which might not be good enough), a bank will spend $5000 to hire a top-notch lawyer who can design a watertight contract for 2000 loans, so each The cost of the loan is reduced to 2.50 yuan, so it becomes profitable for the financial intermediary to issue a loan of 1000 yuan to Xiao Zhang.

Therefore, the existence of financial intermediaries is of great benefit to small savers and lenders, and can effectively reduce the transaction cost of "money".

Where there is investment, there is risk
On January 2009, 1, Russian Prime Minister Vladimir Putin met with visiting Italian Eni President Scaloni at the Novo Ogaryovo residence in the suburbs of Moscow. risk.Putin proposed that European energy companies establish an international consortium and purchase from Gazprom the technical gas needed to ensure the transit of natural gas from Ukraine to Europe, and then supply the natural gas to Ukraine as soon as possible to resume transit gas transmission.

Scaloni called Putin's proposal "very constructive" and a new statement on resuming gas shipments to Europe via Ukraine.Scaloni hopes that the above-mentioned international consortium can be established as soon as possible.

Putin's proposal is actually a sharing of investment risks.Of course they invest in entities.Investment risks are ubiquitous throughout economic activities, especially in the capital market.There is risk in investment.

Investment risk refers to the risk taken in order to obtain uncertain expected benefits.It is also a kind of business risk, which usually refers to the uncertainty of the expected rate of return of business investment.Only under the condition of unity of risk and benefit can investment behavior be effectively regulated.

Risks can be roughly divided into two categories: the risk of loss of principal and the loss of purchasing power.Systematic risk and non-systematic risk separately or jointly lead to fluctuations in the value of securities, and investment in securities will result in a loss of principal.Systematic risk refers to the inherent risk of the market as a whole, which cannot be reduced by diversification.However, diversification can completely eliminate unsystematic risk, which refers to the specific risk associated with an individual investment.Unsystematic risk can be easily eliminated by diversification.

Loss of purchasing power occurs because the realized return on the investment is too low to compensate for the reduction in the principal due to taxes and inflation.Obviously, investing too conservatively can also be risky.To make gains after adjusting for inflation and taxes, you have to tolerate some uncertainty.

There are many ways to avoid investment risks, among which insisting on long-term investment is a powerful measure to avoid investment risks.

The Dam Investment Research Consulting Company in the United States once conducted a special study on the returns of ordinary American investors investing in mutual funds. U.S. equity mutual funds returned an average of 2000% annually.This result is not surprising considering the average equity mutual fund expense ratio of 500 basis points. What is surprising is that the average investor earns an annual return of only 16%, which occurs because they are always making mistakes. The timing of switching between different funds or between cash.

However, Jeremy J. Siegel's calculation of risk levels under different holding periods provides stronger support for long-term investment.According to the calculation of risk based on the standard deviation of the actual rate of return under different holding periods from 1802 to 2001, with the extension of the holding period, the risk levels of different asset types show a decreasing trend, which is even more surprising Interestingly, once the holding period increases to 15 to 20 years, the standard deviation of the average real annual return of stocks is smaller than the standard deviation of the average returns of bonds and treasury bills.If the holding period exceeds 30 years, the risk of stocks is less than 3/4 of the risk of treasury bills.

The significance of the conclusion of this study is that in a long-term perspective of investment, the actual risk that investors bear is far lower than the risk level of short-term investment behavior, so as to avoid irrational investment behavior disturbed by short-term asset fluctuations.

The performance of the Chinese stock market also reflects this.During the six years from 2001 to 2006, stock funds brought investors an annual compound rate of return of 6%. For ordinary investors who pay too much attention to short-term returns, it is difficult to correctly face the fluctuations in fund performance during the period. Short-term fluctuations make it impossible to enjoy the reasonable returns given by the market in a complete market cycle.

Every investor has his own level of risk tolerance, and the short-term loss he is willing to accept in order to achieve long-term goals can be used as the standard to measure the level of risk.If you take too much risk, you will panic and sell all your positions when the market goes down.However, if you always pay attention to your risk tolerance when building your investment portfolio, you can calmly face the market downturn and achieve your investment goals.Investors should not accept risks beyond their ability to bear, otherwise it will inevitably lead to the failure of financial management behavior.Investors should choose the type of fund whose risk level is within their tolerance level to invest according to their own risk tolerance level.

Financial globalization: sunshine and dust

As early as 2000, the European financial market, which had been adjusted for two years, began to show impressive international performance. The securities market ranked second in Europe after the three stock exchanges in Paris, Brussels and Amsterdam were established. The oldest and second largest, the London Stock Exchange and the Frankfurt Stock Exchange also announced the official launch of their merger plan this year.

Financial integration has indeed crossed from being limited to mergers among financial institutions to mergers between financial markets where sovereign barriers have always been insurmountable. As well as the penetration and replacement of traditional market transactions in new trading methods, the pan-European integration trend of the financial market surging within the EU has achieved a real breakthrough in cross-border mergers for the first time on the basis of share ownership.

However, the United Kingdom is still hovering outside the euro zone, and was once in a state of endangering its status as the only international financial center in Europe. It is also because the financial trading market in the world was still a market territory mainly divided by national boundaries more than two months ago. Therefore, many experts believe that it would be perfect if the London Stock Exchange could merge with the Frankfurt Stock Exchange located in the Eurozone to form an "International Stock Exchange".

It should be known that in just two months, five exchanges in the eight major European securities markets have achieved substantive alliances, which indicates that more exchanges will enter the process of accelerating mergers.In the next year or so, European derivative markets including LIFFE, DTB, and MATIF have also completed their "one basket" negotiations that have lasted for more than two years and entered the merger process.

All these push global exchanges to enter a period of cross-border mergers and reorganizations that has never been seen in history.Since then, Europe has entered the best period in history for the global restructuring of financial markets.

The internationalization of the financial market has always been one of the development trends of financial business.The development of the financial market transcends national boundaries and gradually tends towards global integration.Financial globalization refers to the process in which the financial activities of financial entities continue to expand and deepen on a global scale.

Since the 20s, the trend of financial market internationalization has become increasingly evident and accelerated.Mainly manifested in:
1. Transnationalization of financial institutions.Not only developed countries have established a large number of transnational banks in the world finance, but also developing countries have established a number of offshore financial centers and financial institutions abroad.

2. Internationalization of financial asset management.The establishment of the European currency market, the European bond market and the global stock market enables people to operate the monetary and financial assets of any country in the world in the offshore market.

(End of this chapter)