Monday, April 08, 2013

A SHAKY RECOVERY

The imprints of the financial meltdown are receding slowly & steadily from global economies and there is a visible recovery in capital and financial markets. However, the recovery is still uneven across geographies and asset classes. Also, With increasing concerns over sovereign debt in the Euro Area & S&P’s downgrade of US treasury bonds, the world economies could slip again .

Emerging again...
The unforgettable financial crisis of 2008 had put global financial markets in a tizzy. Now, that same growth seems to be coming back on track. As the trends clearly indicate, the growth of the world’s financial stock comprising of equity market capitalisation and outstanding bonds & loans has increased from $175 trillion in 2008 to $212 trillion in 2010. As a matter of fact, the resumption of growth trends is particularly because of the new equity issuances mainly coming from the emerging market companies in 2010, which totalled around $387 billion. Moreover, the increase in the IPO deal volume occurring in emerging markets and an 11.8% ($6 trillion) increase in the market capitalisation figures will also add to the future growth.

...But depth yet to arrive

Developed countries have much deeper financial markets than those found in emerging economies. Financial depth in the US, Japan, Western Europe & other developed countries is near or above 400% of GDP compared to around 280% in China, 209% in India & less than 200% in the other emerging markets. Moreover, every country has different components of financial depth. For instance, Japan’s financial depth is due to the size of its huge corporate bond market, while stock market capitalisation, corporate bonds, financial institution bonds & securitisation is the highest in US et al. While there is potential for growth in each and every individual asset class, the final share varies from country to country.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
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