Dubai: Driven by accelerating growth in capital raising activities over the next one-and-a-half decades, emerging nation capital markets are expected to capture a more proportionate share of the global capital market universe relative to their economies, closing the gap with their developed peers, according to a Credit Suisse Research Institute study.
Despite rapid growth in capital-raising over the past two decades, emerging country capital markets remain underdeveloped relative to the size of their economies. With a 39 per cent share of global output — or 51 per cent based on purchasing power parity, the 20 emerging nations currently only represent less than half of their fair share of the global capital market universe — accounting for only 22 per cent of global equity market capitalisation, and a 14 per cent of the global corporate and sovereign bond markets.
Disparity
The Credit Suisse Research Institute, forecasts that by 2030, Emerging Market share of global equity market capitalization will increase to 39 per cent while for corporate bonds and sovereign bonds to 36 per cent and 27 per cent respectively, around double their current market share.
“The disparity between developed and emerging nations in the global capital market universe will close by 2030. This should be driven by a disproportionately large contribution from emerging market equity and corporate bond supply and demand driven by growth in domestic mutual, pension and insurance funds, given the relatively high savings ratios prevalent among emerging economies,” said Stefano Natella, Global Head of Equity Research, Investment Banking, at Credit Suisse in New York.
China
While the US will remain the largest equity market in 2030 with a capitalisation of $98 trillion and a weight of 35 per cent, China will overtake both the UK and Japan to become the second largest market with a $54 trillion (Dh198 trillion) capitalisation and a weight of 19 per cent. Cumulatively China has accounted for 40 per cent ($639 billion) of the total emerging world equity capital markets deal value (initial public offerings and secondary public offerings) since 2000. Over the next 17 years, China’s share will increase to 60 per cent or $3.6 trillion, representing a 5.5 fold nominal increase.
Similarly, Credit Suisse also forecasts China’s dominance of corporate bond market deal value in Emerging Markets over the last 14 years (a 37 per cent share or $1.6 trillion of the total) will persist, eventually taking a 53 per cent share (or $18.4 trillion) of total Emerging Market primary activity by 2030.
