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The Dow Jones World Stock Index -- introduced in 1993 -- lets investors measure the performance of their global portfolios. This index includes results from more than two dozen countries grouped in three geographic regions: the Americas, Europe and Asia/Pacific. Eventually it will include every country where foreign investors can buy stocks.
A FIXED MARK
Indexes are always measured against a benchmark, a fixed value established at a specific time. The term originally referred to a surveyor's mark indicating a known height above sea level, but it has come to mean any standard that's used as a basis of comparison. In the World Stock Index, for example, it's a date 12 months prior.
Each country's market index is computed in its own currency, and in four global currencies: dollars, pounds, marks and yen. Using global currencies ensures that the figures are comparable because the impact of exchange rates is figured in (see pages 24-25). The Asian Wall Street Journal uses versions of the index customized for different markets. For example, the edition used here gives the figures in dollars.
The composite, or benchmark, is reported in the last line of the chart. It provides the broadest picture of the international equity markets, and is a basis for comparing the different markets' performances.
READING THE INDEX
The World Stock Index reports equity market performance in each country for the previous trading day and the percentage change from the day before in local currency. Then the same information is computed in dollars, adding the amount it has gained or lost. In Indonesia, for example, the closing index in rupiah was 225.79, up .77% from the previous trading day. Computed in dollars for the benefit of U.S. investors, it was $193.06, up $1.34 or .70% from the previous numbers.
The markets are also tracked over the past 12 months, and since the beginning of the current year. Investors can compare the year's high and low to the current performance. Note that in this example performance in the Americas was stronger -- with a 22.93% increase -- than either Asia/Pacific at 4.73% or Europe/Africa at 11.14%.
However, the biggest gain reported for a single market since Dec. 31 is the 23.55% registered in the Philippines.
Asian-Pacific Stock Markets
Stock markets in the region have carved out a place on the global equities map.
Over the last decade, stock market activity in the Asian-Pacific region has boomed. Small markets have expanded, and new ones have opened. Buyers from all over the world can and do own shares in most of them.
Technologically, the markets are sophisticated. Trading is handled electronically in most of the markets, and many of them are actively working toward paperless settlement systems. Most of them are increasingly transparent, with management and performance information available and regulatory measures in place. Others are working to meet international standards.
Some markets are open to all, while others limit participation by nonresidents. That can be done by setting a cap on the percentage of a company or class of companies that can be owned by overseas investors, by limiting investment to a fixed percent of market capitalization, or by selling different classes of shares, one for citizens and another for everyone else, as the markets in China do.
The issue of encouraging overseas investment, which brings in added capital, can be in conflict with worries about losing domestic control or having to respond to demands of investors who expect greater levels of information or corporate responsibility. Overseas investment can also increase a market's volatility, broadening the scope of influencing factors.
As markets grow in the region and attract more overseas investors, there has been a parallel demand for greater accountability-more information, and more uniform standards -- often described as transparency (see page 38). Most of the markets are moving toward greater openness and greater security, often based on U.S. practices. Typical of the reforms are systems for settling transactions and recording ownership of shares, which can be and often are handled electronically.
Recent upheavals in various markets have quickened the pace of this trend as well. But problems such as poor accounting methods, insider trading and unreliable stock transactions can persist, despite efforts of regulatory agencies to change them.
Singapore is known as Southeast Asia's safest haven for equity investors, a reputation that is both the island's strength and its weakness. When other regional markets lose steam, money flows into Singapore. But when other markets have their periodic wild bursts, Singapore languishes by comparison.
Trading activity in 14 Asian-Pacific markets is reported daily in The Asian Wall Street Journal. Information on shares is listed in alphabetical order, followed by the volume, or number of shares traded, the closing price and the price change from the previous trading day.
In this example from the Kuala Lumpur Stock Exchange in Malaysia, Aokam Perdana was actively traded, with 1.279 million shares changing hands. Its price fell two sen. But Arab-Malay Corp. was more thinly traded, with 6,000 shares bought and sold. In this case, its price rose 25 sen.
Copyright © 1998 by Lightbulb Press, Inc. and Dow Jones & Co., Inc., All Rights Reserved.