Can an Inflatable Economy Survive?

READ MORE

Historically, professional investors have dominated stock markets. These investors assimilate vast amounts of information and make difficult investment decisions, sometimes on a daily basis. Picking the right stock among the thousands on offer can be daunting, especially for retail investors.

Retail Investing on the Rise

During the COVID-19 pandemic, the number and impact of retail investors have increased dramatically. Retail investors now account for almost as much on the US stock market as mutual and hedge funds combined. On the , the percentage of individual investors increased from 33% to 45% over the last five years. In this period, the percentage of institutional trading by both foreign institutional investors and domestic institutional investors declined from 32% to 18%. Retail investors increased their purchases on the as well, now holding 15% of the UK stock market. 

The rise in retail investment is the result of many factors. First, a number of people have more free time on their hands and need alternative sources of income. The COVID-19 pandemic spurred a global trend in working from home. Employees were no longer commuting and had more time to explore the stock market. Furthermore, many found themselves in economic distress. As jobs and salaries were slashed when businesses suffered severe setbacks and even went bankrupt, many turned to the stock market in search of alternative sources of income. 

Second, retail investors found a favorable opportunity to invest because of the dramatic crash in stock markets in the early days of the pandemic. The US fell by a whopping 37% from early February to March 2020. Stock markets worldwide saw a similar plunge. This gave many first-time investors an opportunity to invest in stocks at significantly lower prices while the market was bottoming out. In the past, after the of 2001 and the of 2008, retail investing went up as well. It seems many invest in stock markets at times of crisis in the hope of earning profits when the markets rebound.

Make Sense of the World

Unique Insights from 2,500+ Contributors in 90+ Countries

I agree to receive emails and other content from 51łÔąĎ. I understand that I may repeal my consent at any time. You can review our Privacy Policy and Terms of Use for further information .

Third, retail investors were chasing higher returns at a time when central banks slashed interest rates to extremely low levels. To support businesses and increase consumer spending, central banks adopted extremely loose . While liquidity went up, the offered by most traditional investment options remained poor, making people turn to the stock market.

Fourth, reveal that many US citizens used the COVID-19 stimulus checks to invest in the stock market. 

Fifth, online trading platforms made it more accessible to trade on the stock market. Prior to the growth of such platforms, stockbrokers charged high commissions, asked for minimum account sizes, levied fees for inactive accounts and demanded subscription payments. Online like Robinhood in the US, FreeTrade in the UK and Zerodha in India made the online trading process seamless for retail investors and disintermediated traditional stock brokers. Investing in stock markets has become easier and cheaper.

Finally, retail investors now have easy about stock markets through platforms like Reddit. On one subgroup, r/wallstreetbets, retail investors discuss what stocks to purchase and reasons for doing so. This gives them the confidence and the direction to purchase stocks.

Retail Investor Mentality

Retail investors tend to be bullish about the market. They are more optimistic than professional investors and represent a younger demographic with a median age of 35, down from 48 before the pandemic.

These younger investors often navigate by sentiment in contrast to older and professional investors who are more conservative. Many of these investors have yet to experience a bust and pay less attention to company finances. Younger traders tend to jump from one hot trend to the next. In March 2020, they bought shares of airline companies and cruise ship operators on the assumption that the economy would reopen shortly. Apart from trends, younger retail investors tend to buy shares of companies in technology and gaming, their areas of interest.

One such bet has made international headlines earlier this year when GameStop, a struggling video game retailer that operates over 5,000 stores in the US, suddenly saw retail investors buying up its in droves in January. Many professional investors were shorting the company’s shares, which involves selling shares with the aim of buying them back later for cheaper prices. Professional investors estimated that GameStop’s business would go down in the pandemic, meaning that its share price was bound to fall. Retail investors took a different view. 

Some retail investors spread the message to buy GameStop shares on r/WallStreetBets, which led to GameStop’s share price rising by nearly 1,900% in less than a month as investors started buying. Those who shorted the GameStop stock, including hedge funds like Melvin Capital Management, lost nearly $6 billion. Most GameStop stock was bought on online trading platforms like Robinhood. 

The GameStop trading frenzy is one of the clearest examples of a shift in power on the stock market. As of August 27, was $204.95, below the $347.51 peak in January, but still much higher than the $17.25 mark at the end of 2020. This shows that retail investors can take on professional investors and win, at least in the short term.

Interestingly, the GameStop saga is not a one-off event. Shares of , a movie theater chain, rose by approximately 2,900% in May and June when information circulated on Redditt platforms caused stock purchases. Sophisticated institutional investors were selling the company’s shares because of its financial troubles, while retail investors continued to buy. GameStop and AMC shares fired up by retail investors using Reddit have been labeled as .

Retail investors are causing many across the markets. The share prices of many companies, especially smaller-cap ones, have become more volatile. Many professional investors believe that this volatility is driven by irrational and unpredictable investing by novices. Speculation and rumor now play a bigger role because information on social media is rarely fact-checked. Besides, social media traps people in echo chambers where they engage with others who hold similar viewpoints and beliefs. This leads to mob investing, exacerbating the already increasing volatility of stock markets.

Here to Stay?

If retail investors continue to operate on stock markets, will occur. They have caught the investment bug and might become seasoned investors with time. The influence of social media on stock markets might increase as well.

Some take the view that rising retail investing is a passing trend. History suggests that, more often than not, retail investors have lost money on the stock market. Their investments tend to be in companies with unsound fundamentals. They lack the training, experience and judgment to invest wisely. 

History offers a sobering example. October 29, 1929, when markets crashed, leading to the Great Depression, is known as “.” Billions of dollars were lost and thousands of investors wiped out. This could happen again. is rising. Interest rates might follow suit. Other investment options might become more attractive, and the stock market might suffer. This could easily lead to retail investors fleeing stock markets much in the same manner as they have flocked to them.

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔąĎ’s editorial policy.

The post How Retail Investors Are Changing the Stock Market appeared first on 51łÔąĎ.

Before the start of the second wave of COVID-19 infections in March, the pandemic seemed to be under control in India. In September 2020, the country an average of 95,000 daily cases of COVID-19 during the peak of the first wave. By January 2021, that figure had dropped to under 20,000.

At the same time, the United States went from around 35,000 confirmed cases per day in September to a peak of over in January. At the start of the year, the United Kingdom was in the midst of a deadly second wave of infections, which reached over cases a day. At that time, Britain was battling a more contagious of COVID-19 known as the “Kent variant,” which is named after the region where it was first discovered in England. Countries in Europe and around the world raced to halt flights to and from the UK in a bid to control the spread of the new strain, which they feared would soon go beyond the British isles.

India’s Health-Care System Is in Shambles

READ MORE

To put these figures in perspective, the UK population is 66.6 million, the US is 328 million and India is around 1.36 billion. That means at the start of 2021, the infection ratio per 100,000 people in India was far lower than in the UK and the US.

Lax Safety Measures

As a result, Indians thought the country was beyond the worst of the pandemic. In March, Harsh Vardhan, the Indian health minister, said the country had entered the “” of the health crisis. This led to a false sense of hope, which made the public and the central and state governments complacent. Restrictions that were brought in to curb the spread of the coronavirus were quickly eased. Life had almost returned to normal in January with the opening up of , restaurants, hotels, tourist locations and public transport.

At the same time, were announced in five states, including West Bengal, which the ruling Bharatiya Janata Party (BJP) had set its sights on winning. All political parties and their supporters held rallies with tens of thousands of people in attendance. The Hindu festival of attracted millions of people who took a dip in the Ganges, a river considered sacred in Hinduism. Nearly 60,000 were also allowed to enter stadiums to watch cricket matches. All of these events took place with lax safety measures in place, with no social distancing or wearing of masks.

In hindsight, India did not anticipate a second wave of COVID-19. It lifted the lid on public restrictions at a time when countries such as the UK were battling a winter wave of infections. As mainland Europe realized, it was inevitable that the more contagious strain of COVID-19 discovered in the UK would spread. India failed to understand this despite repeated .

Now, India is battling its own second wave. The country has repeatedly broken the record for the daily number of confirmed cases of COVID-19. On May 2, India recorded more than new daily infections. The actual number of cases is believed to be far higher due to a of testing kits and people getting tested. Many Indians are not getting checked because they have no symptoms but are contagious or they are worried about testing positive for the virus. States like , and have been accused of manipulating and the number of positive cases and deaths from COVID-19 to avoid criticism over inefficient governance. Worryingly, epidemiologists that India has not yet hit the peak of the second wave and that the worst is yet to come.

No Improvement to Health Care

It has been argued by many that the pandemic will not come to an end until it is under control everywhere. This is “viruses naturally mutate over time.” There are currently thousands of mutations of the coronavirus around the world, but only a few of them are variants of concern for scientists. As more people contract the virus and spread it to others, it is inevitable that different strains will emerge. This is why despite the successful vaccination rollout in countries like Israel, the UK and the US, authorities have been cautious as they reopen economies and reduce restrictions for the public. The fear is that some variants, such as the one in South Africa, will evade the existing vaccines and render them less effective.

India has a worrying COVID-19 variant of its own that is officially called B.1.617. This new strain — which is also known as the “double mutant” due to two mutations coming in the same variant — accounts for 61% of infections in Maharashtra, a major epicenter in India. It is unclear whether the Indian variant is driving the second wave, but it is believed to be more transmissible than previous strains of the virus. This is in addition to fear over the UK strain, which has to more than 50 countries.

Complacency by the central and state governments has made the health care system as Indians desperately seek medical assistance. When the pandemic first hit India in March 2020, authorities failed to strengthen the infrastructure at hospitals. As of 2018, the Indian government spent only on health care. Other emerging economies such as Brazil and South Africa spent 9.51% and 8.25%, respectively. In India, there is doctor per 1,445 people, which is far lower than the figure the World Health Organization recommends. At public hospitals, there were only 0.7 beds available per 1,000 people.

In July 2020, state governments opted to build temporary centers for COVID-19 patients instead of buying additional beds for existing hospitals and allocating more resources. These centers were barely used. Due to their high maintenance costs, they were dismantled a couple of months before the second wave hit. Now, as hospitals face a short supply of beds and a high demand for them, some state governments are considering whether to rebuild the centers.

In March 2020, Modi 150 billion rupees ($2.03 billion) to strengthen the infrastructure of health care in India. The government purchased personal protective equipment (PPE) and an additional 60,000 ventilators. Yet as of last fall, just under of the ventilators had been installed in hospitals across the country. Both public and private hospitals are currently short of beds, ventilators and oxygen in many major cities.

As COVID-19 infections sweep the country, social media networks have been flooded with posts calling for help. Friends and families of those suffering from the virus have desperately sought to find available beds in hospitals, oxygen supplies or medication to combat COVID-19. Disturbing reports of people dying after being unable to access treatment have been heard all over the country. Ambulances and other vehicles with COVID-19 victims inside them have lined up hospitals that no longer have space available. Many hospitals have reported that patients they were treating died as the supply ran out. Outside crematoriums, the number of dead bodies is mounting.

The Government’s “Vaccine Diplomacy”

With the situation worsening, the BJP-led government has been by Indian courts for focusing on state election campaigns instead of taking preemptive action to combat the second wave. Aside from easing restrictions too quickly and not reinforcing the health care system in time, many states face of COVID-19 vaccines. In January, Prime Minister Narendra Modi to have rolled out the “world’s largest vaccination drive,” aiming to get jabs in the arms of 300 million people by July. At the time of writing, only of the Indian population — 29 million — has been fully vaccinated with two doses. This is compared to in the UK and in the US, both of which focused on vaccinating their most vulnerable citizens first to drive down new infections and deaths.

India had other things in mind. It sought to distribute doses worldwide as part of its vaccine diplomacy. With the world’s largest manufacturer of vaccines, India has so far 66 million doses to 95 countries. Yet, earlier this year, the Modi government implemented an to donate free batches in an attempt to boost the country’s soft power when the pandemic was seemingly under control. Many observers questioned whether the move was necessary instead of focusing on vaccinating Indians themselves. Toward the end of March, as infections increased and vaccines decreased, the Modi government realized that its decision to export millions of doses was premature. It decided to halt the export of doses and instead vaccinate Indians over the age of 45. Yet the damage had already been done due to poor planning by the BJP-led government.

Meanwhile, state administrations in Maharashtra, Delhi and Andhra Pradesh that are not ruled by the BJP have claimed they are running short of vaccines. Critics have accused Modi of playing politics with as states with BJP governments, such as Gujarat, were given almost the same number of vaccine doses as Maharashtra, which has a population double that of Gujarat. Vardhan denied that regions were short of supplies and instead blamed state governments for the poor rollout of vaccines.

In order to counter criticism over its inefficient planning, the central government announced on April 19 that all citizens above 18 would be able to get from May 1; it had previously focused on health and frontline workers and those over 45. By opening the door for all adults, an additional 600 million citizens are now eligible. Yet with vaccines in short supply, some states have the rollout. The website through which citizens can book a jab minutes after it went live for the new age group.

The government has approved al funds for vaccine manufacturers to ramp up production. However, the increased production is unlikely to be available for a few months as vaccines go through a lengthy process of packaging and safety checks. To make up for this shortage, the government has fast-tracked the process for foreign-produced vaccines. These include Johnson and Johnson from Belgium and Sputnik V from Russia, which cost more than domestically-produced ones.

Public Image

In an attempt to maintain his public image, Modi the nation on April 20. Indians needed assurances and demanded answers, but the prime minister offered none. He neither informed the public about plans to tackle the crisis, nor did he give any reasons about why the country is facing a horrific second wave. This is despite him previously boasting that India’s handling of the pandemic had been exemplary and should a model for the world. It seems the central government is content with placing the blame on state administrations and the public instead of admitting that it made mistakes.

Earlier this week, the BJP to win in the state of West Bengal despite heavy election campaigning. It seems that Indians are beginning to realize that Modi’s preoccupation with his public image, and his need to win votes, is costing the country dearly. In fact, the obsession with elections on the part of Indian politicians has contributed to the second wave of COVID-19 infections. India can only hope that Modi and other politicians shift their focus from politics to health care before it is too late.

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔąĎ’s editorial policy.

The post Where India Went Wrong appeared first on 51łÔąĎ.

How Did India Combat COVID-19 in 2020?

Last year, Indian Prime Minister Narendra Modi a stringent lockdown that brought economic activity to a shuddering halt. This lockdown led to a dramatic contraction of India’s GDP by in the April-June 2020 quarter. The economy recovered somewhat in later quarters, but it experienced a recession in the 2020-21 financial year for the first in 25 years.

Arguably, the lockdown was a success in preventing a rapid spread of COVID-19 last year. In percentage terms, India did not do too badly. After all, it has nearly 1.4 billion people in contrast to the US population of 330 million. The daily new cases in India dramatically until recently when the second wave hit the country. Thanks to a young population and public health measures, India experienced a remarkably low rate.

What’s Behind Chile’s Vaccination Success?

READ MORE

India has low per capita income and poor health care facilities. So, its achievement in controlling the COVID-19 outbreak has been hailed by many public health experts, the World Health Organization (WHO). In January, India launched a massive vaccination program to fight the pandemic. This was possible because the country has a track record of mass vaccination and massive vaccine production.

Indian manufacturers supply than 60% of the world’s vaccines against diseases like polio and measles. Early on, the country began mass production of two COVID-19 vaccines: Covishield and Covaxin. The Serum Institute of India (SII), which partnered with the University of Oxford and AstraZeneca, had already produced and stocked approximately 70 million Covishield even before India granted emergency approval to their vaccine. 

On January 16, India launched an ambitious plan to vaccinate around 300 million people by June. The world’s largest vaccination focused first on those with high vulnerability to the coronavirus. First on the list were health care workers. They were followed by those who were 65 years or older. This ensured that the vaccine was not monopolized by the richest sections of Indian society. 

As vaccinations have increased, the Modi government has eased restrictions in the country. Crowds have gathered at large weddings, sporting events and festival celebrations. The government lifted restrictions to stimulate economic activity. A poor country like India with a large population could not afford a lockdown for too long. However, the easing of restrictions has not only led to increased economic growth, but also rising cases of COVID-19 infections. India faces a tough balancing act between stimulating economic activity and curtailing a pandemic.

India’s Vaccine Diplomacy

During the pandemic, India has embarked on an ambitious foreign policy initiative. Modi announced the Vaccine Maitri to supply COVID-19 vaccines to other nations only four days after India began domestic vaccinations. With the world’s largest of vaccines, India has approximately 61 million doses to 84 countries, which have included free batches. It has pledged 200 million doses for the WHO’s COVID-19 Vaccines Global Access () initiative to ensure vaccines for 92 low and middle-income countries.

India began its vaccine diplomacy by distributing doses to its immediate neighbors:,, and the . The country has also exported vaccines to faraway places such as the, where the likes of , and have benefited from Indian aid. Leaders of countries such as and have publicly thanked Modi for his country’s generosity.

As per some foreign policy experts, India’s vaccine distribution is a diplomatic masterstroke. It helps the country gain goodwill and increase its soft power. It could lead to a more peaceful neighborhood. In the future, India might win much support, strengthen its claim to a permanent seat at the UN Security Council and emerge as a great world power.

Vaccine diplomacy might be giving a rare chance to counter China, which has launched the Belt and Road Initiative to increase its global footprint. For decades, China has backed Pakistan and, for the last few years, has increased its presence in Myanmar, Bangladesh, Sri Lanka and Nepal. With Chinese influence growing in India’s closest neighbors, the country has understandably become anxious.

In June 2020, Chinese and Indian troops engaged in a bloody hand-to-hand combat with many dying in the process. Since that clash, relations between India and China have been fraught. India has over 200 Chinese apps and restricted Chinese investment into the country. COVID-19 has given a unique opportunity to India — the “” — to compete with China. By shipping vaccines to low and middle-income countries, India is gaining influence at the Chinese expense whose vaccines have been by Western media.

Rich countries have failed poorer ones because they have focused on domestic programs. Unlike India, the United States, the European Union and the United Kingdom are focused completely on vaccinating their domestic populations. India’s generosity is unique and might lead to long-term gains.

Masterstroke or Distraction?

However, there is a counterargument that India has been premature in kicking off vaccine diplomacy. It did so before setting its own house in order. According to the Johns Hopkins Coronavirus Resource Center, as of April 2, India has nearly 69 million doses, fully inoculating only 9.6 million people. That is just 0.71% of its population. India’s focus should have been getting every one of its citizens vaccinated instead of basking in complimentary tweets from foreign leaders. Such goodwill might turn out to be very transient. 

Recently, India has down its vaccine exports and speeded up its vaccination program. The government has now enrolled private hospitals in its vaccination drive, and everyone above the of 45 is now eligible for the vaccine. Modi himself got vaccinated on March 1, boosting public faith in COVID-19 vaccines and increasing their uptake four-fold. It seems that the government is paying attention to its critics.

Time will tell whether India’s vaccine diplomacy was a bold masterstroke or an unwise distraction. It reveals that there are no easy choices for any nation during a raging pandemic.

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔąĎ’s editorial policy.

The post Is India’s Vaccine Diplomacy a Good Idea? appeared first on 51łÔąĎ.