22 June 2011

Financial Services in Emerging Economies 2011

UK banks account for 19% of lending to emerging economies, more than that provided by any other country.

Other key findings in TheCityUK's Financial Services in Emerging Economies 2011 report include:

• Most financial markets in emerging economies have risen faster than GDP between 2005 and 2010

• Fastest growing markets have been exchange-traded derivatives, bank assets, marine insurance, mutual funds and equity market capitalisation

• Financial market ranking for main emerging economies in line with ranking based on GDP

International bank lending, which has more than doubled over the past five years, is crucial for capital spending on infrastructure and other major projects. Lending by UK banks to emerging economies totalled $862bn at end-2010 and is particularly important to some countries accounting for 71% of lending to South Africa; 46% of lending to United Arab Emirates; 30% of lending to China, India and Malaysia; and 17% of lending to Brazil.

The CityUK report finds that growth in the largest emerging economies - led by Brazil, China and India - is being facilitated by rapid expansion of domestic and international financial markets in those countries: these markets increased by between 100% and 400% between 2005 and 2010, exceeding the 97% rise in nominal GDP in the same countries during this period.

In addition to international bank lending, those markets to have roughly doubled in size between 2005 and 2010 were domestic bonds and insurance. Markets to have risen more rapidly included commercial bank assets, marine insurance, mutual funds and equity market capitalisation which each rose about threefold. The number of contracts traded on derivatives exchanges grew fastest with a fivefold increase. Only pension assets and international bonds have grown more slowly than GDP: pension assets were up by a third and international bonds by over three quarters.

For many leading countries – including Brazil, China, India, Mexico, Turkey and Poland - their ranking amongst emerging economies based on GDP is similar to their ranking based on financial markets. For other countries there is some difference: for example, South Africa, Malaysia and Chile rank higher in the size of financial markets than on GDP ranking. By contrast, Russia, Indonesia and Saudi Arabia tend to have a lower ranking in financial markets than for GDP.




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