[OPE-L] Re:[OPE-L]  global financial assets and global capital flows - McKinsey data

From: Jerry Levy (jerry_levy@VERIZON.NET)
Date: Fri Feb 01 2008 - 15:13:07 EST


Hi Jurriaan: 

Thanks with providing us with these links and this valuable (no 
pun intended) data. The 'Executive Summary' of the McKinsey Global Institute report is below.

In solidarity, Jerry

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The total value of the world's financial assets-including
equities, private and government debt securities, and bank 
deposits-grew faster in 2006 than the historical average rate, climbing by 17 percent to reach $167 trillion. Spurred largely 
by equities, this growth in financial assets also outpaced growth in global GDP. Meanwhile, cross-border capital flows climbed to 
a record $8.2 trillion. 

These are among the findings of the McKinsey Global Institute's (MGI's) annual analysis of long-term trends that are reshaping global capital markets-trends likely to continue and not be significantly altered by the credit market turbulence in the 
United States and Europe in 2007. Mapping the Global
Capital Markets: Fourth Annual Report stems from several proprietary MGI databases that cover the financial assets, cross-border capital flows, and foreign investments of more than 100 countries since 1990. This year's update focuses on how world financial markets evolved in 2006, the latest year for which comprehensive data are available. 

Report highlights: 


World financial depth, measured as the ratio
of financial assets to global GDP, rose to nearly 350 percent. 
For the most part, deeper financial markets are beneficial because they are more liquid, create better access to capital for borrowers, offer more efficient pricing, and increase opportunities for sharing risk. 




For the fourth year in a row, equities made the largest contribution to the growth of global financial assets. During
2006, equities rose by $9 trillion, accounting for nearly half of the total increase. Just three countries account for 52 percent of equity growth that year: the United States, China, and Hong Kong. 




The United States remains the world's largest and most
liquid financial market, with $56.1 trillion in assets, or nearly
one-third of the global total. In 2006, the United States posted the
largest growth in financial assets in the world, adding $5.7 trillion. Equities contributed 43 percent of that growth-and this reflected earnings growth, not rising equity market valuations. 




Europe's financial markets collectively are approaching the scale of the U.S. market. Including the United Kingdom, Europe's financial markets reached $53.2 trillion in 2006-still less than the U.S. total, but growing faster. Three-fourths of the gain came from the deepening of Europe's equity and private debt markets. 
The eurozone's financial markets reached $37.6 trillion, the U.K. markets $10 trillion, and other Western European nations $5.6 trillion. Equally important, the euro is emerging as a rival
to the dollar as the world's global reserve currency, reflecting 
in part the growing vibrancy and depth of Europe's financial markets. 




In Asia, the value of China's domestic financial
assets increased by 44 percent in 2006 and grew more in absolute terms than the assets of any country other than the United States. Japan's short-lived financial market recovery ground to a halt in 2006, with total financial assets flat compared with the previous year. The financial markets of the rest of Asia combined grew to $18.8 trillion, just shy of Japan's $19.5 trillion. 




Altogether, the financial assets of rapidly developing nations in Asia, Latin America, Eastern Europe, and Africa grew $5.3 trillion in 2006 in constant exchange rates, or 29 percent, to a total of $23.6 trillion. That increase accounted for one-quarter of total global growth in financial assets. 




Cross-border capital flows climbed in 2006 to a record $8.2 trillion-$1.3 trillion more than the year before and triple
the amount just four years earlier. Together, the eurozone, the United States, and the United Kingdom accounted for 80 percent of the growth in global capital flows over the past ten years. 




Cross-border capital flows into emerging markets have grown at nearly twice the rate of flows into developed countries. They reached a new height of $700 billion in 2006-but that is still 
less than 10 percent of the global total. Moreover, capital outflows from emerging markets now exceed inflows, making emerging markets net capital providers to developed countries. 




The global value of all foreign investments-the sum of those annual flows-grew by $10.8 trillion in 2006, or 17 percent, to reach $74.5 trillion. Foreign investors own one in three government bonds around the world, up from just one in nine in 1990. One
in four equities and one in five private debt securities is now held by a foreign investor, triple the level in 1990. 


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