Strong Economy and Its Effect on Financial Market Essay

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Following the trend of economy, it is important to investors to understand that strong economy creates strong stock market. To elaborate further, as stock prices are increased by current and future expectations of earnings, thus without a strong economy it would be difficult for the companies to increase and sustain their earnings (Kong 2013). The economy development is usually calculated using the gross domestic product of a countries. On the other hand, a change is the stock price can also cause a major impact to the consumers and investors directly. Hence, a loss in confidence by investors can cause a downturn in consumer spending in the long term, which will also affect the economy’s output (Aysen 2011). The graph below shows the …show more content…
Along these lines, capital market assumes a crucial part in exchanging the financial funds from surplus regions to shortage regions, therefore increasing the benefit and prosperity of the nation (Sinha 2012). For instance, in the financial times, the Asian companies have been stated to loan out more in bond markets in the month of April than ever before as the pursuit for yield gets back into higher percentage (Noble 2014).
In the latest development of the capital market, the Securities Commissions of Malaysia, stated in the Capital Market Masterplan 2 2011, will attempt to evaluate whether the capability to forbid goods or transactions that are hindering to the steadiness of the market or its members is needed. Furthermore, The SC will likewise fortify its communication about the risk being taken. This is because low consciousness of risks around investors prompts unsuitable inducements to risk taking.

There are many industries that have flourish due to the capital market. The recent industries that gain from the capital market is the knowledge based economy. The capability of the companies in this industry at their early stage of growth to increase capitals in the capital markets is likewise gainful in light of the fact that it permits these organizations to develop rapidly. This development consecutively speeds the spreading of new technology in the economy (Dudley and Hubbard 2004). In this case, twitter can be a great example

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