Notes and numbers from McKinsey Global Insitiute’s (MGI) fourth annual report on Mapping Global Capital Markets.
- The world’s financial assets (calculated by adding together the market value of publicly traded equities, bank deposits, and outstanding face value of government and private debt securities for 100 countries in the MGI database) rose by $25 trillion in 2006, to $167 trillion. Compared to the average annual growth rate of 8% from 1995-2005, the growth rate from 2005-6 is 17.5%.
- The US ($56.1 trillion), eurozone ($37.6 trillion), Japan($19.5 trillion), and UK ($10 trillion) account for 75% of the global financial assets.
- Financial depth (defined as the ratio of a country’s financial assets to its GDP) has increased from being equal to the world GDP in 1980, to double the size of the world GDP in 1993, and further up to 3.5 times the world GDP in 2006.
- China’s financial assets grew by $2.5 trillion during 2006 – a 44% increase over 2005 and the second highest growth rate in the world after Russia’s 60%. China’s equity market accounted for 75% of its growth in financial assets
- Japan’s financial assets have remained almost flat in 2006, with a marginal growth of $140 billion from 2005
- Emerging markets account for only 14% of the global financial assets.
- Cross-border capital flows (net result of buying and selling of financial assets through the year) increased to $8.2 trillion in 2006- 8 times the amount in 1990.
- In 2003, the euro surpassed the dollar as the most popular currency for international bond issues. The euro has become the second most popular reserve currency, with a 25% share in global reserves in 2003, up from 18% in 1999.
- The US attracted $1.9 trillion in foreign investment in 2006 and is the largest recipient of capital inflows in the world. It has purchased $1.1 trillion in foreign assets in the same year. With foreign assets in high yielding equity investments, and foreign liabilities in low-yielding debt securities, the US receives higher returns on its foreign assets than it pays in foreign liabilities.
- Emerging markets have become net providers of capital, having invested $332 billion abroad than they have received in 2006.
An interesting commentary on the low level of investments in India relative to China
One reason India has less money to invest is that its national saving rate is only half of China’s 40%. India’s households save as much as Chinese ones do, but many Indian families put their money in informal savings vehicles rather than banks, so the funds are not available for investment.
I am aware of a cultural proclivity in India towards holding savings in the form of gold, which may possibly be one of the ‘informal savings vehicles’ referred to in the report.
Filed under: finance | Tagged: capital markets
