Justification
The aim of investors is to have a high rate of return from their investments. In this sense, investors must identify if the Australian Equity (Share) market is a place where investors would expect a good economy, a stable currency, a stable government, a high potential of growth and high rate of return. Currently, financial investors from different parts of the world are experiencing at least good signs of cash flows and earnings from investment. Positive flow of tourism and shareholding companies keeps on moving to the frontline and continuous creation of employment and powerful engine of business since there are no foreign quotas, tax, exchange controls and trade barriers. However, risks on the side of investors are definitely unmanageable. Such risks include lending money, market risk, and international risks. Competition among different investors will extend and complication since Australia is a nation to attract big investment. (Lamb, 2004).
In this present world of prevailing dynamism monitory power, operate as the supreme authority. It forms the lone means of fulfilling fundamental human requirements as well as aspirations. Thus economic instabilities like stock market crashes, fiscal depressions etc cast devastating effect on human life. Material and Financial risk management is the process of creating economic value in an organization by the use of fiscal mechanisms to administer exposure to financial risks. Analogous to other forms of risk management, financial risk management calls for recognizing the cause of risk, measuring their intensity, and formulating strategies to address them.
Financial groups also generally have the assets required to pay back anything that happens and will often not mark identity theft on your credit score. It is much easier to find somebody more amiable to speak with face to face since financial groups also have better office hours than banks do. Many even have prepared offices to specifically handle identity theft. This way, they are prepared ahead of time and can make the whole process that much quicker. Being a personal victim of identity theft, I was able to reconcile my balance and receive my credit back within a couple of weeks and little to no paper work. (Dollard, 2006).
However, a friend of mine, since recently having $800 in charges on his account at a bank, the bank has frozen his accounts, imposed nearly 6 overdraft fees and are currently seeking a lawsuit against him for supposed fraudulent gaining of funds by asking the bank to remove the amount. The company, which charged that amount, insists he made the purchase, even though they do not have documentation to prove it thus far. It could take a couple of years before he gets his situation fixed, and in the meantime, he has been looking for another place to bank.
In the context of financial or banking equity is concerned it can be sated that the face of banking has changed dramatically over the past several decades. Gone are the days of the loan officer that takes a loan request from a prospective borrower, stares the borrower down with an intimidating look while scouring his financial statement, and calmly points out that the bank will look at his request in a few days and see what can be done. What has brought about the radical changes from old? One word sums it up. Competition. Borrowers now have unlimited banking options, while banks compete mercilessly for more market share. This is the new face of banking. Hesitate a moment too long on making a loan decision, price yourself out of the market, or give poor customer service, and you may find yourself with a deteriorating customer base. (Edelman, 2005).
With regard to the materials sector, the market stressed the need to adopt a more forward-looking approach to loan classification and provisioning practices across the system to ensure that loans are realistically valued on balance sheets. Key to the issue was the tracking of those accounts, which managed to keep out of the high risk zone but at risk of underperforming. Also crucial to banks was the issue of these particular classes of Australian equity market. If materials section had to maintain capital adequacy ratios, then such customers were vital to them, as they still had not passed over to the ‘bad debt’ corner.
When people have more money, the spend more and put more back into the economy. It is plain to see why market based materials and financial systems are the superior method of economic growth. Whenever you de-regulate how business is run, people tend to show the good side of them more and help each other out more. Laissez faire is an important cornerstone in today’s free world market, and it should stay that way. Materials and Banks are still regulated by the government, and obviously have been failing to keep up to par. The choice is obvious and hopefully the government begins to support private materials and financial groups more in the future. (King, 2006).
Materials section had to have sufficient incentives to compensate for the loss of these customers. If they faced difficulties obtaining private finance, the materials experts suggested pushing in public capital to selected banks with the clause of moral hazard attached. Another approach worked around the problem was to defer classification of an account as a bad debt for a certain number of years until so that capital provisions would be made by the operating profits of the segment without loss. This only meant delay in the resolution of issues. (Fletcher, 2005).
Risk of investing
Materials section and Financial risk management being a specialized form of risk management focuses on determining when and how to hedge, that is to make investments so as to reduce or cancel out the risk in another investment, using financial mechanisms to administer pricey exposures to risk. Financial derivatives have brought about radical changes in the finance system by inventing new methods of understanding, measuring, and managing financial risks. (Kar, 2006).
As per the Australian Equity – Growth Funds Quarterly Investment Report to 2008 it has been reported that the following is the break up of sector allocation in the Australian Equity Market.
0.9% Liqiudity, 2.1% Property Trust, 5.4% Telecommunication Services, 32.4% Materials, 3.3% Consumer Discretionary, 7.4% Energy, 8.7% Consumer Staples, 7.0% Health Care, 6.5% Industrials and 26.3% Financials. Thus, it is obvious that materials and financials are the top grosser in the market with overwhelming market shares. Similarly, in the context of holdings there are about eight holding companies within the top ten holding companies with funds in the Australian Equity Market that belongs to Materials and financial.
There is Rio Tinto Limited with 6.3% and BHP Billiton Ltd with 16.5% of market share in the materials section. In the context of financial, there are CBA with 3.4%, QBE Ins Group with 3.4%, ANZ with 3.5%, Westpac Banking Corp with 4.7% and NAB with 6.2% shres of the overall equity market of Australia. Incidentally, the total Fund Size as on 30 June 2008 in wholesale was $46.3m with an Inception Date of November 1998. Similarly, the total Fund Size as on 30 June 2008 in retail was $27.8m with an Inception Date of July 2001. (AXA, 2008).
Overall, although materials and banks have been the most popular method of economic growth with high returns, they are quickly becoming one of the least reliable sources but Mr. Crawford is an aggressive investor thus, it justifies the move. Private enterprise is taking a new face in the modern world and is helping to facilitate strong economic growth, even during a time of recession. In this modern day and age, businesses are becoming more personal, which most people enjoy. This gives people a larger sense of trust with companies and allows them to get more loans.
References
AXA; 2008; Australian Equity – Growth Funds Quarterly Investment Report to 30 June 2008; Member of the Global AXA Group. Web.
Dollard, John & Doob, Leonard W; (2006); Aggression in Decision Building; New Haven and London: Yale University Press.
Edelman, S; (2005); Evaluation Techniques in International Business Management; Bloemfontein: ABP Ltd.
Fletcher, R; (2005); Principals: Beliefs and Knowledge; Believing and Knowing; Dunedin: Howard & Price.
Kar, P; (2006); History of Industrial Economics and Related Applications; Kolkata: Dasgupta & Chatterjee.
King, H; (2006); Financial Principals Today; Auckland: HBT & Brooks Ltd.
Lamb, D; (2004); Cult to Culture: The Development of Civilization; Wellington: National Book Trust.