FNCE 4070Financial Markets and Institutions

Lecture 8

Financial Markets: A Global Overview

Theme of This Lecture Overall, the United States’ financial market is larger

than any other individual country. However, we have seen a growth in both the size

and role of financial markets in other countries. In 2009, the global capital market was estimated at $232

trillion (bonds, equities and bank assets). Of this the U.S. accounted for 26%; by comparison in 2001, the U.S. accounted for 37% of the global capital market.

America’s share of the world’s aggregate stock market has fallen from 66% in 1950 to 31% in 2009.

America’s share of the world’s aggregate bond market has declined from 44% in 2001 to 34% in 2009.

America’s share of the global banking market (measured by assets) fell from 28% in 2001 to 15% in 2009.

In 2010, banks in the U.K. accounted for 37% of the turnover in foreign exchange (U.S. accounted to 18% and Japan 6%).

Global Financial Markets: 2009 By year end 2009, global financial markets were

estimated at $232.2 trillion dollars. The break down was as follows: Stock Market Capitalization: $47.2 trillion Debt Securities: $92.1 trillion

Of which: Public (Government) Debt $36.4 trillion Of which: Private Debt $55.7 trillion

Bank Assets: $92.9 trillion

Note: in 2009, global financial markets were 4.1 times the size of world GDP.

Source: IMF, Global Financial Stability Report, October 2010 http://www.imf.org/External/Pubs/FT/GFSR/2010/02/index.htm

World’s Capital Market: 2001 - 2009

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World's Capital Markets (Trillions of USD)

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World’s Capital Market: 2001 - 2009

Capital Markets by Country and Region, 2001 - 20092009 Total in Trillions of $ U.S. % of Total: 2001 - 2009

World: $232.2 U.S.: $60.9 Japan: $24.2 EU: $85.7

UK: $18.2

France: $15.8

Germany: $12.1

Euro Area: $62.9 Newly Industrialized Asia*

$ 9.7 Developing Countries: $33.5

* Includes: Hong Kong, Korea, Singapore and Taiwan. 20%

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U.S. Capital Market as a Percent of Global Capital Market

Equity Markets by Country and Region, 2001 - 20092009 Total in Trillions of $ U.S. % of Total: 2001 - 2009

World: $47.2 U.S.: $15.1 Japan: $ 3.4 EU: $10.0

UK: $ 2.8

France: $ 1.9

Germany: $ 1.3

Euro Area: $ 6.6 Newly Industrialized Asia*

$ 4.3 Developing Countries: $ 9.9

* Includes: Hong Kong, Korea, Singapore and Taiwan. 20%

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U.S. Equity Market as a Percent of Global Equity Market

World’s Ten Largest Stock Exchanges1. New York Stock ExchangeCountry: United StatesDomestic Marker Cap: $ 11,837 BillionThe New York Stock Exchange, the world’s largest stock exchange, is located on Wall Street, in New York, USA. The average daily trading on this stock exchange is about $ 170 Billion. It merged with the completely electronic stock exchange Euronext in 2007. Started in 1792, it was first called the New York Stock & Exchange Board. It trades in the continuous auction format, where traders act as agents and execute stock transactions on behalf of investors. The total capitalization of listed companies on the NYSE is $ 12.25 trillion.

2. Tokyo Stock ExchangeCountry: JapanDomestic Market Cap: $ 3,306 BillionLocated in Tokyo, Japan, the Tokyo Stock Exchange has 2414 listed companies. It has a combined market capitalization of US$3.1 trillion and was founded in 1878. The London Stock Exchange (LSE) and the TSE are now developing jointly traded products and sharing technology which makes it beneficial for both economies.

3. NASDAQCountry: United StatesDomestic Market Cap: $ 3,239 Billion“NASDAQ” originally stood for “National Association of Securities Dealers Automated Quotations. It is the largest electronic screen-based equity securities trading market in the United States. It has more than 3800 companies listed and has the maximum trading volume as compared to any stock exchange in the world.

4. EuronextCountry: Belgium, France, Holland, PortugalDomestic Market Cap: $ 2,869 BillionEuronext is a European Stock Exchange, based in Paris. It had a market capitalization of US$2.26 trillion. Its merger with NYSE made it the first electronic stock exchange. Formed in the year 2000, it has 1400 companies listed. Currently, the trading volume is USD 25 Trillion.

5. London Stock ExchangeCountry: United KingdomDomestic Market Cap: $ 2,796 BillionFounded in 1801, The London Stock Exchange, is among the largest stock exchanges in the world. It has 3000 companies listed and is part of the London Stock Exchanges Group. It is also referred to as the William Morris. It has the maximum number of foreign companies listed and is completely electronic.

6. Shanghai Stock ExchangeCountry: ChinaDomestic Market Cap: $ 2,704 BillionLocated in Shanghai in China, the Shanghai Stock Exchange is the world’s third largest stock exchange by market capitalization at US$3.07 trillion as of May 2010. It was founded in 1891 and has 890 companies listed on it.

7. Hong Kong Stock ExchangeCountry: Hong KongDomestic Market Cap: $ 2,345 BillionThe Hong Kong Stock Exchange is Asia’s second largest stock exchange, founded in 1891. It has 1,241 listed companies with a combined market capitalization of $2.7 trillion. In 2000, the Stock Exchange of Hong Kong Limited, Hong Kong Futures Exchange Limited together with Hong Kong Securities Clearing Company Limited merged together under a single exchange HKEx.

8. Toronto Stock ExchangeCountry: CanadaDomestic Market Cap: $ 1,608 BillionToronto stock exchange is the third largest stock exchange in North America and the eighth largest in the world. It was founded in 1861, and descended from the Toronto group of Brokers. It has the most oil, gas and mining companies listed on it than any other stock exchange. It trades about 250 million shares per day.

9. BM & FBovespaCountry: BrazilDomestic Market Cap: $ 1,337 BillionBolsa de Valores, Mercadorias & Futuros de São Paulo is a stock exchange based in Sao Paulo. It was established in 1890 and is the 10th largest stock exchange in the world today in terms of market capitalization. There are 450 companies listed under it. It has offices in New York, Shanghai and London. In 2008, the São Paulo Stock Exchange (Bovespa) and the Brazilian Mercantile and Futures Exchange (BM&F) merged, creating BM&FBOVESPA

10. Bombay Stock ExchangeCountry: IndiaDomestic Market Cap: $ 1,306 BillionThe Bombay Stock Exchange is the oldest stock exchange in Asia, and the 12 th Largest in the world. It is located on Dalal Street in Mumbai. It has about 5000 companies listed on it. The BSE Sensex is widely used for trading in Asia and India. It was founded in 1875, and its trading volume is $1000 billion. It is the largest of the 22 stock exchanges in India.  It has grown significantly since 1990, when liberalization and privatization gained momentum in India.

Bond Markets by Country and Region, 2001 - 20092009 Total in Trillions of $ U.S. % of Total: 2001 - 2009

World: $92.1 U.S.: $31.7 Japan: $11.9 EU: $33.6

UK: $ 4.7

France: $ 5.2

Germany: $ 5.7

Italy: $ 5.1

Euro Area: $27.2 Newly Industrialized Asia*

$ 1.8 Developing Countries: $ 7.6

* Includes: Hong Kong, Korea, Singapore and Taiwan.

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U.S. Bond Market as a Percent of Global Bond Markets

Banking Markets by Country and Region, 2001 - 20092009 Total in Trillions of $ U.S. % of Total: 2001 - 2009

World: $92.9 U.S.: $14.2 Japan: $ 8.9 EU: $41.7

UK: $10.7

France: $ 8.8

Germany: $ 5.1

Italy: $ 3.4

Euro Area: $29.1 Newly Industrialized Asia*

$ 3.6 Developing Countries: $16.0

* Includes: Hong Kong, Korea, Singapore and Taiwan.

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U.S. Banking Market as a Percent of Global Banking Market

World’s Ten Largest Banks, 20101. BNP Paribas – $3.21 Trillion in Assets BNP operates in 84 countries along with retail banking markets in France, Luxembourg, Italy, and Belgium.

2. Royal Bank of Scotland Group (RBS) – $2.99 Trillion in AssetsAlthough the British Government is currently the largest owner of RBS, it is still the largest banking group in Scotland offering personal banking, business banking, private banking, insurance, and corporate finance services.

3. Barclay’s PLC – $2.5 Trillion in AssetsBarclay’s is currently listed on both the London and New York Stock Exchange and was represented on the Tokyo Stock Exchange up until 2008.  They offer a variety of services ranging from wealth management to retail banking while operating under two business groups: Global Retail & Commercial Banking and Investment Banking & Investment Management.

4. Deutsche Bank – $2.43 Trillion in AssetsWith 2,000 Branches in 72 countries, Deutsche Bank remains the largest German bank.

5. HSBC Bank – $2.42 Trillion in AssetsHSBC has 460 branches in the United state. All but 80 are located in New York State. This bank offers their services to 4 million customers giving them access to global markets.

6. Credit Agricole – $2.3 Trillion in AssetsAs one of the leading retail banking companies in Europe and France, Credit Agricole has 11,500 branches world wide and services about 59 million customers.

7. Bank of America (BAC) – $2.5 Trillion in AssetsBank of America is the largest bank holding company in the United States. It serves 99% of the Fortune 500 Companies along with clients all over the globe. After acquiring Merrill Lynch in 2008, BAC has become the largest wealth manager in the world.

8. Mitsubishi UFJ Financial Group (Mitsubishi) – $2.07 Trillion in AssetsMitsubishi is Japan’s largest bank holding group providing investment services such as trust banking, commercial banking, international finance and asset management services.

9. J. P. Morgan Chase – $2.02 Trillion in AssetsJPM is traded on the New York Stock Exchange and provides services to clients in 100 countries.

10. UBS AG – $1.8 Trillion in AssetsWith Headquarters in Zurich and Basel, UBS AG offers services to private, corporate, and institutional clients holding its stance in major financial markets throughout the world.

Foreign Exchange Markets

Daily Volume in Billions of USD

Total: $5,056 United Kingdom:

$1,854 United States: $ 904 Japan: $ 312 Singapore: $ 266 Switzerland: $ 263 Hong Kong: $ 238 Australia: $

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Percent of Foreign Exchange Market Turnover

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