Macro-economic and industry factors affecting shares of Macquarie Group Ltd

Principal of Financial
Management

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
INTRODUTION..............................................................................................................................1
MAIN BODY..................................................................................................................................1
1.Macro-economic and industry factors and risk associated with shares....................................1
2. Firm specific factor and risk in relation to the performance of the shares..............................2
3. Historical and expected return from the shares of the company.............................................4
4. Past 5-year trend of the company............................................................................................7
5. Volatility of the share prices of the Macquarie Group ltd indicating the high low prices of
the share over the five year..........................................................................................................8
6. Explaining the concept of diversification to Aunty.................................................................9
7. Investment in other class of assets.........................................................................................11
8. Measuring the volatility of the shares using beta coefficient................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUTION
Investing in shares refers to buying and managing the them for a while with the purpose of
making money. There are two ways of earning money form the shares of the company are- if the
company grows and becomes valuable which increases the worth of its share and investment and
if the shares pays the part of the company’s profits every year in terms of dividend.In this report,
Macquarie Group Ltd is taken as an ASX listed company with the share name of MQG:AU. It
offers banking and financial advisory services along with fund management services. This report,
presents about the macro economic factors along with the industry factors that affects the share
price and the risk associated with it. Analyzing the factors affecting the return based on the past
year data. It also covers the concept of diversification, alternative asset classes and the
significance of beta coefficient in the share market.
MAIN BODY
1.Macro-economic and industry factors and risk associated with shares
Macro-economic and industry factors
In the last few months, the Australian Stock market has experienced highs and lows
because of the global trade tensions along the variation in the Australian economy such as
decline in the property prices, interest rate cuts, miraculous win of Coalition government etc. A
detailed description about the factors affecting the country and industry are given below.
Interest rate cut by RBA
Apart from the trade war between US and China, the unfavorable outcome of the
economic indicators has taken the downturn (Kolios, 2020). In the situation of weak inflation and
the rising unemployment rates, the Reserve Bank of Australia (RBA) has announced an interest
rate cut by slashing the official rate by 25 basis points making the new record low of 1.25%. it
was taken to support employment growth and the progress towards inflation targets. This
decision ahs affected the rate of mortgage loan and other interest rate because of the current
situation faced by the Australian economy.
US-China trade battle
The war between US-China has created fluctuations in the Australian stock market. This
trade concerns stared after threats to raise the tariffs on the Chinese goods to 25 per cent because
of which Chinese government has also announced retaliation tariffs on the goods of US worth of
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US$60 billion. The conflict between the two countries have raised the concern globally from the
growth prospects.
Brexit Effect on Australia
The exit of Britain from the European Union has also raised the big problem for the
Australian companies as well, which are having a good relation and strong connection with the
UK capital market along with the European find market (Macro And Micro Factors Driving
Australian Stock Market. 2019).This has caused the concern for the growth prospects of such
companies as they are earning significant amount from the UK and Europe.
Australian Housing Market
In the past few months, the Australian Housing Market has seen a continuous fall in its
prices along with the number of dwelling approvals.The building approvals has fell to 4.7 per
cent and the house prices has dropped to 0.4 per cent in April and May 2019 respectively. Under
such situation, the Australian Prudential Regulation Authority (APRA)has presented a proposal
for removing 7% floor in mortgage serviceability assessments, giving benefits to the new home
loan buyers.
Risk associated with shares of Macquarie Group Ltd
The company is exposed to variety to risk rising out of the financial services and all these
risks is managed as per the risk management policies and procedures. The shares price of the
company is associated with the global credit and equity market especially in the US and Europe
and the operation of the business is dependent upon these markets directly or indirectly. It
includes exposure to the securities, loans and other activities and any uncertainty in the global
credit market such as increased funding cost, fall in the equity and capital market which ahs an
impact over the transaction flow of the in various industry sectors will have an adverse impact on
the financial performance of the company leading to increase the risk in the share price.
2. Firm specific factor and risk in relation to the performance of the shares
The firm specific factors that can affect the performance of the shares are stated below.
Business and financial condition
The business and financial condition of the Macquarie Group Ltd has a huge influence
over the performance of the shares of the company. The continuing adverse effect associated
with the credit and equity market conditions may affect the ability of the company to meet its
liquidity requirements which affects its international capital market and may also lead to increase
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