The global financial markets have already entered a new era. For the better part of the past thirty years their rapid growth was driven by today’s developed world. In the course of less than a decade, however, a new set a players, the emerging market economies, are driving much of the new growth in global financial activity. While the consequences of the global financial crisis will take many years to play themselves out, it is clear that the crisis has greatly quickened the relative ascendency of the emerging world’s financial markets.
We examined a large swath of financial market indicators to assess just how far the emerging economies have increased their financial development and strength over the past decade.
Some of more notable findings include:
- Emerging markets’ share of world stock market capitalization is now 30%, equal to its share of world GDP.
- The share of IPOs listings outside of New York and London have increased from 46% of global total value in 2000 to 78% in 2010.
- Almost non-existent five years ago, emerging market corporate bond issuance is increasing rapidly and has surpassed total sovereign issuance each year since 2003, reaching a record $211 billion in 2010.
- Emerging market economies now hold two-thirds of the world’s foreign exchange reserves.
- Approximately 60% of emerging market countries’ sovereign debts are currently rated investment grade, up from just 2% in 1993.
The research notes that although global investors now view many emerging market securities as having equal risk profiles of those in the developed world, they still find clear evidence that in terms of financial risk, they have not “decoupled” from the broader global economy during periods of financial turbulence.
The monthly brief concludes that going forward, the emerging market economies will need to continue deepening their financial markets if they want to reach the next stage of economic development.
Download Rapid Ascendency in English or Russian.
