World’s Most Influential Financial Markets
The World’s Most Influential Financial Markets
Every year,the Financial Development Report from the World Economic Forum, provides a listof the world’s most influential and developed financial markets. The report,published on BloombergBusiness, is only in its second year but has alreadybecome a crucial resource for policy makers and investors alike.
This year,identifying the biggest emerging markets was particularly difficult. It tookthe aid of dozens of leading bankers, consultants and academics for the WEF toevaluate 55 countries using quantitative and qualitative data. Looking atfactors like transparency, liquidity of stock markets, complexity of legal andregulatory frameworks, and even the infrastructure to support business, thelist has been finalized.
Britain sawa rise from the second spot to the top since last year. This is despite theeffects of the recession being particularly strongly felt in the country and abig impact being had on the financial sector. Nevertheless, Britain stillmanages to lead the world on a number of other factors: from the density ofinsurance and the volume of foreign currency transactions to the liberalizationof financial markets.
Despitethese strengths, the UK was downgraded for its bank efficiency (something of awell-known factor in the country) and currency stability. The size of thebanking system and M&A however stood in its favour.
The UK hasa per capita GDP of $43,785 and $12.2 trillion in total financial assets.Assets per person come in at around $199.754.
Australiaclimbed nine points in the last year to find itself at the number two spot.With low sovereign debt and good retail access to capital, the country findsitself in overall good financial standing. That said, Australia still has aweak bond market capitalization and less impressive commercial access tocapital. This essentially describes how easy it is for specific groups to getaccess to funding.
Australia’sper capita GDP is $47,400 with total financial assets of $3.5 trillion and$165,535 in assets per person.
The US wasnumber one according to the report last year but has since fallen to numberthree. This fall has been blamed on the instability in financial markets, aswell as the dollar. Other drawbacks include poor commercial access to availablecapital and some serious weaknesses in regulatory policies and the politicalscene. The WEF came down particularly hard on the US for its ‘distorting taxsystem’ and an overall mistrust of politicians.
The USeconomy has been suffering for a long time now and this is clearly reflected inan unstable dollar and tight access to credit. The US has a per capita GDP of$46,859 and $190,930 assets per person. Nevertheless, it is still a hugecountry and a very key player financially with $58.1 trillion in total assets.
Perhaps asomewhat surprising entry and particularly considering a jump of six places inthe ranking. Singapore’s success though comes down to a high level of financialstability and a very efficient banking sector. With good commercial access tocapital and a great business environment, its success is likely to continue.The country also has a huge $789.1 billion in financial assets.
That said,Singapore also suffers from an underdeveloped bond market and high public debt.
5 Hong Kong
It shouldcome as no great surprise to see Hong Kong high on this list. Hong Kong is alsoranked number three in the world for financial stability and is well known forproviding a highly conducive business environment. That said, it is only numberfive due to weak bond markets, weak management education and low collegeenrolment. Overall, this equates to ‘low human capital’.
Canada hasgood grades in several areas, with good access to capital and great bank stability.Canada’s banking system actually ranks number 2 globally. Points were dockedhowever for the difficulty enforcing contracts, some issues surrounding publicdebt lows and a low per capita penetration of mobile phones.
Switzerlandis often high on any list pertaining to finances and economic strength. It haslong been known for its solid and discreet banking system and is the country ofchoice for millionaires around the world for big nest eggs. The company isgenerally financially stable still with strong financial markets. That said,the country was hurt by the financial crisis and a crackdown on tax evasion hasalso caused some upset.
With thetop ranked management education and decentralized policy making however, Switzerlandstill comes out well overall.
Withcorporate governance and liberalization, freewheeling markets and greattechnology infrastructure, the Netherlands is punching above its weight. It’salso nicely consistent according to this list, having only climbed one pointfrom number nine last year. Holding it back are high bank overheads and heavydebt.
Japan hasdropped five places as a result of instability in the huge banking system. Thatsaid, the large banks are still very efficient. On the flipside, centralizedpolicy making and an instable currency were marks against it.
Denmark isan entirely new entry but is no stranger to these sorts of lists. Denmark wasadded to the study this year and was found to be in strong standing thanks to anumber 2 ranked institutional environment, a liberal market and great humancapital. On the downside are less impressive IPOs, credit bureau coverage andforeign direct investment.
Overall, this list makes for interesting readingfor investors but should be considered just one factor among many. The list isultimately a collection of some sometimes peculiar factors and the overallorder of the list doesn’t necessarily do much to predict the value ofinvestments. After all, with countries jumping up and down the list nine placesat a time, this list is likely to look completely different next year anyway.Take this with a little pinch of salt then. Taking up some of the subsequentspots were France, Germany, Belgium, Sweden, Spain and Ireland.