Along with the sovereign governance classifications, Ecstrat maintains a database of over 9,000 stocks in all major markets that are further classified by their corporate governance structure. The database serves as a base for all of Ecstrat's work.
To highlight potential risks and opportunities in major markets, Ecstrat has developed a five-factor proprietary scorecard that is intended to be indicative of potential risk and opportunities in major markets worldwide, represented as recommended weightings for asset allocation.
Applying a proprietary ranking methodology for 48 major markets that utilities the governance database, we calculate a sector adjusted ranking which highlights the cheapest and the most expensive markets in Ecstrats universe at any given point in time. The rankings are complemented by four other top-down factors, which are Macro, Policy, Governance and Currency that together make-up the scorecard.
An examination of the main macro-economic measures, looking for major imbalances and whether there is any recent marginal shift in a positive or a negative direction, especially if it has not been recognised by the market. We also consider the sensitivity to a significant slowdown in global growth.
Policy choices in individual countries will determine whether their respective economies can emerge from the shift in the global monetary environment without lasting damage, especially at present when there are a number of crucial elections either recently completed or scheduled to take place over the next twelve months. We look for potential inflection points in terms of policy if they are likely to be relevant to financial markets.
Focusing on corporate governance in its broadest sense, to include relationships with all stakeholders, this is intended to gauge the extent of moral hazard in the broader economy, especially the existence of any blurred boundaries between the state and the corporate sector.
The real effective exchange rate (REER) compared with the level over the past 20 years and purchasing power parity (PPP).