Lesson 7 After a Bullish'93, More in '94?

1. Lesson 7 After a Bullish'93, More in '94?

2. I．Teaching Points: • 1. the general survey of the world stock market in 1993 • 2. the prospect of the world stock market in 1994 • 3. the indirect investment and the international financial market • 4. the terms: stock exchange, the Dow Jones industrial average, bears and bulls, bull market, monetary policy • 5. the difficult sentences in the text

3. II. Teaching Aims: • 1. let the students understand the situation of the world stock market in 1993 • 2. let the students know the prospect of the world stock market in 1994 • 3. let the students understand the terms: stock exchange, the Dow Jones industrial average, bears and bulls, bull market, monetary policy • 4. let the students understand the difficult sentences in the text

4. III. Teaching Process • 1. Introduction to the Text • This article, taken from the American weekly magazine Newsweek, is a general survey of the world stock market in 1993, and its prospect in 1994. • 1993 witnessed the 3rd consecutive year of price rises on the most stock markets in the world. This was heavily due to the unprecedented amount of equity investment made at home and abroad by the baby-boomers of the developed countries. In addition, most of the money that the central banks of many developed countries had put into their economies flowed into financial assets rather than products, which also helped push stock prices up.

5. What is the prospect of the world stock market in 1994? Foreign investment in the emerging markets will keep rising as their economies will be growing most rapidly. This, however, will subject to both political and exchange risks, as for the established markets, stock prices will stop rising and begin coming down with the Tokyo market being exceptionally uncertain. • Comparative reading: Lesson 2 ---Are Commodities Back? in content (both lessons have discussed "indirect investment") and Lesson 3---Annual Report on American Economy in structure (both lessons include two parts: the examination of the past and the prospect for the future)

6. 2. Reading for gist • Read the text with about 15 minutes, and then try to answer the following questions: 1). What was happening to the world stock markets in 1993? 2). How do bears and bulls generally agree and disagree concerning share prices in 1993? 3). What role did American investors play in the surge of world stock markets in 1993? 4). Why do bulls think share prices will keep rising for 1994? Does the author agree with them? 5). What risks does the author point out concerning overseas financial investment? 6). What is the prospect for the American stock markets in 1994, according to the author? 7). Will the main European stock markets behave the same way as the American stock markets? 8). Why is it difficult to make a prediction for Japanese stock markets?

7. 3. Detailed Study of the Text • Coming off one of the best years (with 1993 ending as one of the best years) ever for equities around the world—shares rose by a staggering 20% (by 20% that is astonishingly high, staggering: unbelievable) on average (平均) in 1993—the seasonal celebrations (referring to the activities to celebrate Christmas and the New Year) continued all week on many of the world's stock exchanges (places where stocks and other securities are traded 证券交易所. See note 1). Most markets were near highs and nearly a dozen set records last week(刷新纪录). In Europe, the Frankfurt, Paris, Zurich, Amsterdam, Madrid, Brussels and Stockholm bourses (bourses: the French word for "stock exchange".) rang (敲响，开盘，opens) in 1994's first day of trading (ushered in, marked the beginning of the first day of trading) by establishing new highs(新高). Brokers in Singapore, Seoul, Kuala Lumpur, Manila and Bombay were all smiles (be all smiles 笑容满面, 喜气洋洋) as their exchanges broke records(打破纪录), too. Johannesburg did the same. Last Thursday, Wall Street (here it refers to the stock market in New York, with the New York Stock Exchange located in Wall Street being the largest)joined the party(joined the happy situation of worldwide rises in stock prices) with the Dow Jones industrial average (See note 3) closing above 3, 800 for the first time. Even in beleaguered Tokyo (in Tokyo, which is beset with, troubled with, economic problems), where women brokers followed their good-luck custom of wearing silk kimono (a long, wide-sleeved Japanese robe 和服) for the first day's trading of the year, the Nikkei index (the index used to indicate the general trend of the stock market in Tokyo 日经指数) managed (got) a 4% gain (a 4% rise) over the last week. // (起---describe a situation or phenomenon)

8. The party (the happy situation of worldwide rises in stock prices) has already gone on (continued) for three years. How long can it last? Few (people) disagree that shares are selling for some pretty fancy prices (too high prices) by historical standards. The arguments (debates) begin over (on / at / about) whether that matters (matter: v. to be important). Bears (those who expect stock prices to fall. See note 4) say that overvalued shares (shares whose market values are too high over their actual values) must fall back in line with (must go down to conform to)underlying economic realities(economic realities that form the basic of the stock market, the actual economic basis) sooner rather later. Bulls (those who expect stock prices to rise. See note 4)counter that argument (refute that argument) with two mystical phrases (phrases whose meanings are so hidden as to be beyond understanding 神秘莫测)—"low interest rates" and "international investing". As long as these two factors keep money flowing into stock markets, they contend (argue / believe), shares prices will rise. //（承---present the questions behind the phenomenon. and here the question is How long can it last?)

9. 1993 was the year that equity investors discovered the world (the international market) in a big way (people who invest in stocks权益投资者 found lots of chances for investment in the world). Frustrated by falling or low interest rates and, in the developed countries, by slow domestic economic growth, return-hungry investors (investors who are eager to obtain returns on investment 渴望获得投资回报的投资者) snapped up foreign stocks in unprecedented amounts (bought foreign stocks eagerly in much larger amounts than before 抢购. snap up: to accept something eagerly and quickly)—an estimated $ 170 billion last year. Few turned overseas as enthusiastically (eagerly, crazily) as American investors, both institutions and individuals. Nearly one out of every five dollars that Americans put into mutual funds last year ended up (was) in a foreign market. The number of American mutual funds specializing in foreign equities grew by more than a third, to 188, and the assets they controlled increased from $22.9 billion, or 4. 8% of total mutual-fund assets, in 1992, to $ 57.2 billion, or 8.7 % of total assets, last year, approaching the proportion (coming near to, being close to the part) of foreign investment by American pension funds (large sums of money pooled according to the Social Security Act to provide monthly income to retired people. Managed by a government agency, these funds are invested both at home and abroad in various ways, mostly in equity and property.). // (转---just tell us what"low interest rates" and "international investing"really mean for bulls.)

10. Emerging Markets • This flood of American investment helped pump up (push up, raise) European stock prices but had a much greater effect on the smaller and more volatile (unstable, easily changing) emerging markets of Latin America and the Pacific Rim. The benchmark Morgan Stanley Capital International (MSCI) index for Latin America's emerging markets rose by 50.7% last year; its Asian equivalent (its index for Asian emerging markets) was up by 96.4 %. Investors became entranced by such returns (investors became extremely delighted by such returns on investment), and foreign money flowing into these markets doubled in 1993, to an estimated $ 38 billion in 1993. "This is no fad (Investment in these emerging markets is not something out of temporary enthusiasm 非一时狂热)," Ms Angela Cozzini, an analyst with Baring Securities in London; she estimates that emerging markets will get $ 45 billion of foreign money in 1994.

11. One explanation for this surge is that the baby boomers of the developed countries are becoming savers rather than spenders as they grow older and thus have more money to invest. In addition, vast amounts of liquidity (large amounts of liquid assets) have been pumped into the global economy by central bankers over the past three years. The Federal Reserve (it functions as the central bank in the U.S.), the Bundesbank (the central bank of Germany) and the Bank of Japan have all loosened monetary policy (Monetary policy is a very important tool for the macro-control of the development of a country's economy. When the economy is sluggish, the government can loosen its monetary policy through the central bank, that is, increase the money supply by putting more money in circulation, so as to stimulate the sluggish economy. When the economy is overheated with inflation, the government can tighten its monetary policy in an attempt to cool down the economy.) in an attempt to reinflate their sluggish economies (to stimulate their dull, inactive economies). But with demand at home still low, only part of this extra cash has flowed into goods and services; much of it has lodged instead in financial assets, particularly stocks, pushing their prices ever higher. Bulls argue that both these trends will prop up share prices (will support or keep share prices at the present level) for some time. European governments will keep stimulating their economies to create jobs, and more baby boomers will keep moving into their high-saving years. That will be good for stocks generally and particularly those in emerging markets, because it is their economies that will be growing most rapidly.

12. Cross-border investment (transnational investment) is not without considerable risk—and often it's only vaguely perceived (people are not clearly aware of the risk). Emerging markets by their very nature are small and often thinly traded, making them especially susceptible to outside influences (making them expecially sensitive to, easily affected by, outside influences). "These markets don't move on fun­damentals but on positive or negative sentiment (These markets don't operate in line with the basic rules of economics but according to people's positive or negative feelings about economic or political policy.) about economic or political policy," says James Lister-Cheese (It is a western custom for a married woman to adopt her husband's family name. But there are cases in which a married woman maintains her family name if she is an outstanding person or comes from a well-known family. Hence a double family name. In this case, "Lister" is James' father's family name and "cheese" is his mother's family name), who follows Eastern Europe's recently established bourses for Morgan Stanley. One of Europe's star markets (outstanding, prominent market) last year was Turkey, which rose by 224 % in dollar terms, largely on the strength of privatisation promises by new Prime Minister Tansu Ciller. And market reaction can be mad­deningly unpredictable. Last week's peasant's revolt in Mexico caused barely a blip (almost brought about no reaction) in the Mexico City Bolsa (the Mexico City Stock Exchange). (Usually an event like a peasant revolt would cause the stock market to go bearish so that investors would be eager to sell out their shares. The author cites this as an example of unpredictable market reaction.) Foreign fund managers, including Edmond Villani, president of Scudder, Stevens & Clark, a global investment-management group, actually saw it as a buying opportunity—although, Villani concedes, the events "should underscore to investors in Mexico that (should underline, emphasize the fact that Mexico is still an emerging market susceptible to outside influences) Mexico is still an emerging market.”

13. Beyond the political risk lies the foreign-exchange risk. A local investor would have gotten a 12 % rise out of the Venezuelan market last year, but a dollar investor would have suffered a 16% loss. That all helps make for volatile markets (The foreign-exchange risk helps to make the emerging markets unstable). Championed by (led or supported by) such American investment gurus (an authoritative and influential expert in investment) as Morgan Stanley's Barton Biggs, the Hong Kong market has been run up (the market has been made to grow quickly in the amount of trading with the coming of American investors) by American investors seeking a China play (seeking opportunities in China). Last week showed what an up-and-down game (a market with unpredictable rises and falls in prices) it can be. After rising 6 % early in the week as Japanese money flooded in (flew in large amounts) from Tokyo market, the Hang Seng index (the index used on the stock market in Hong Kong 恒生指数) fell by almost 10% in two days as foreign investors suddenly got jittery over (got extremely nervous, worried about) China's inflation. Japanese institutions were among the heaviest sellers, and some analysts thought their sudden flip-flop (their sudden turnabout or reversal, which refers to their quick withdraw of investment two days after they had put money in the Kong Kong market 撤资) was one of the reactions for the Nikkei's end-of-week surge.

14. Out of Steam •         If emerging markets in '94 are going to be for the strong of the nerve, the established markets in New York, London and Tokyo are going to be for the firm of mind (Emerging markets in '94 will be only for those people with strong nerve or necessary courage, for emerging markets are volatile and only thses people can bear the risk. At the meantime, the established markets are funning out of energy with prices beginning to go down. Therefore, only firm-minded people have the perseverance to stick to these markets).  Many on Wall Street think that the three-year bull market that began in early 1991 is running out of steam. The broad-based Standard & Poor's 500 stock index rose by barely 10 % last year,  making Wall Street a laggard (one who lags behind for lack of money) by world standards though pinch yourself when you say 10 % growth is laggardly (though it is hard to say that 10% growth is low) and remember that high returns in other parts of the world come i n high risks.  American stocks are selling at 25 times earnings (earnings per share每股收益, which measures the profit that can be distributed to shareholders as dividend on per-share basis) (This sentence implies that the market values of American stocks are too high over their actual values).

15. Either prices have to come down or earnings (that is, the economy) must go up. The consensus on Wall Street (the collective opinion of the financial circle in New York is...) is that the former is likely to happen before the latter. Amid continued signs pointing to a mild US recovery, Treasury Secretary Lloyd Bentsen predicted last week that short-term interest rates would rise. A mild rise is probably built into (put in firmly, become a firm part of) Wall Street's current expectations (At present Wall Street only expects a mild rise in interest rate)! a significant hike—which few expect because inflationary pressures remain weak— would hurt equities prices (a significant rise in interest rate...would hurt equities prices).

16. The main European markets also may have gotten too far ahead of themselves (share prices on the main European markets also may have been too high over their actual values). Share prices already reflect an economic recovery that, outside of Britain, has yet to happen (share prices/market prices already reflect shares' actual values while earnings have moved up due to the recovery of the economy in Britain. Economic recovery will take place in other European countries, too.). "The free ride (figuratively: benefits obtained without cost or effort. When interest rates and bonds yields are falling, stock prices will generally rise accordingly.) that the markets had from falling interest rates and bond yields (a percentage showing the income to be received from investment in a bond 债券收益率) may be over (The stock markets may no longer get the benefits from falling interest rates and bond yields, for both of them will stop falling and begin rising)," says Andrew Bell, head of European Equities Strategy at Barclays de Zoete Wedd in London.

17. But the most difficult call (Am. informal: predication, forecast) to make for 1994 is whether the Tokyo market, which is now down some 54% from its high in 1989, has finally touched bottom (reach the basis. Here it means "reach the lowest level of prices". When a stock market has touched bottom, prices will stop falling but start a rebound). Three years into Japan's worst recession since the war (the "bubble" economy of Japan burst in 1991 and turned into its worst recession since the Second World War), with consumers simply not buying and corporate Japan (the same expression as Japan Inc., used by westerners to refer to Japan) undergoing a wrenching (twist or pull violently) top-to-bottom restructuring (a restructuring from the top to the bottom that is intended to drastically pull up the economy), there were few signs to encourage bullish thinking (few signs to encourage people to think the stock market will turn to be bullish, to think stock prices will rise). "

18. The basic risk in this market is still on the downside," said John Baldwin of Jar-dines Fleming Securities in Tokyo. The yen's recent slide against the dollar (the recent depreciation of Japanese Yen against the dollar. Weak Yen against the dollar makes Japanese products relatively cheaper and helps stimulate Japanese exports, which increase earnings of Japanese corporations) offers some short-term hope for corporate earnings (profits earned by Japanese corporations after tax and interest), and often markets look darkest just before the dawn (this is to say that the Japanese stock markets will soon be bullish). But Japan still has to clear up its debt-ladden banking system (to solve the problem of its banking system which is laden with or burdened with debts), and its corporate restructuring has a long way to go. To many foreign investors, Tokyo doesn't resemble an emerging market as much as a submerging one (The Tokyo stock market is a submerging market rather than an emerging one / is a declining market rather than a rising one). They are waiting for it to come up for air.

19. Homework • 1. Exercise II, V. • 2. Oral Work: After a bullish ’93, more in ’94? // Retell the text. // Discuss the situation of the world stock market in 1993 and the prospect of the world stock market in 1994.