Financial markets in Emerging Economies: Comparison with developed economies

Résumé du document

The financial markets of emerging economies have seen a huge growth in the last few years. These markets are attracting large investments from the developed world, especially because of higher expected return. At the same time; investments in emerging markets are considered to be riskier than the other similar investments in the developed market. A major reason for a higher risk is the state of financial markets in emerging economies. In the paper, we would look at the broad characteristics of the financial markets in the emerging economies and see how they are different from the financial market of developed economies.
Banking Industry: There have been many recent developments in the banking Industry in emerging economies, such as competition and consolidation. The developments are being driven by technological innovation, deregulation and changes in corporate behaviour, in some cases accentuated by recent banking crises. Important aspects include privatisation of state-owned banks, mergers of domestic banks and entry of foreign banks. We look into the banking industry and see how far the banking system has developed and what is the road ahead.
Capital Market: Emerging Capital markets are considered to de more volatile compared to the capital markets in developed economies.

Extraits

[...] In this regard, bank performance during the 1990-1991 recession was quite different from that in previous downturns. Bank conditions, as measured by the book equity capital ratio and the nonperforming loan ratio, also illustrate that the banking sector was well- positioned for the most recent recession (see Figure 2). Simply put, the banking sector today is better capitalized now than it was in the early 1990s.This is particularly clear when one looks at the total capital ratio. The banking sector has changed in distinct ways over our sample period: the number of banks has shrunk through consolidation and failure, banks have substituted commercial and industrial lending for real estate lending, and banks have gradually expanded their business lines to reduce their reliance on interest income from lending. [...]

[...] Indeed, the oil production seems to have reached a ceiling for years now, and ups and downs in oil prices are very much linked to control of existing productions, and its political stakes. Commodities markets recent trends in Emerging countries The Asian crisis and its consequences worldwide Before the 1997 crisis in Asia, the region had experiences a huge economic development. Asian developing countries accounted for about two-thirds of the increase in world consumption of petroleum products over the period 1992–96, and their share in world consumption increased from 12 percent to 15 percent, according to a report by the IMF. [...]

[...] We look into the banking industry and see how far the banking system has developed and what the road ahead is. Indian banking industry The banking system in India operates within a myriad of social, geographical, economic and political systems that typify this nation. The nations banking system has been instrumental in fuelling the growth of the resurgent post liberalization economy. This was ensured by putting in place an efficient and competitive financial system to sustain the ongoing process of reforms in the real sector. [...]

[...] It means that financial risks are concentrated in the banks. If there is to be an alternative to banks for raising large amounts of capital, China needs deep and efficient markets; the absence of these and consequential poor performance hitherto can be attributed to poor self-regulation and ineffective formal regulation (Allen et al, 2006). In contrast, China's hybrid sector (which comprises all non government run and non-listed companies) is an example of where market forces are effective: formal regulation and legal protections are weak and yet financing and governance mechanisms are quite effective. [...]

[...] Scheduled banks comprise commercial banks and the co-operative banks. In terms of ownership, commercial banks can be further grouped into nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks (the old/ new domestic and foreign). As on June 2003, these banks have 66,514 branches spread across the country. As of March 2003, there are about 289 Scheduled Commercial Banks and 56 Schedule Co-operative Banks. Of the 289 Scheduled Commercial Banks are regional rural banks. [...]