emerging market economies: does this classification still make sense? panel 4 – developing...
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Emerging Market Economies: Does this classification still make sense?
Panel 4 – Developing EconomiesWorld Federation of Exchanges
Paulo Oliveira Jr.Chief Business Development Officer
Emerging Markets: AWorld Bank definition and the conventional wisdom to be challenged
Low Income Emerging Markets: USD 975 or less
Lower Middle Income Emerging Markets: USD 976-USD 3,855
Upper Middle Income Emerging Markets: USD 3,856-USD 11,905
Developed Economies: USD 11,906 or more
The World Bank classifies member economies according to gross national income (GNI) per capita
However, the concept became popular to designate nations in a TRANSITION PROCESS or
IN A CATCHING UP PATH
Emerging Economies have attained a relevant position among the top markets
Source: IMF and ECB (Jul09 and Aug09)
Emerging Markets have attracted attention because of their dynamic growth, therefore developing a leading role in the global economy
The BRICs are among the top ten economies in the world
Source: IMF
Emerging Markets
Developed Countries
GDP OF SELECTED COUNTRIES IN 2008In USD billion
INTERNATIONAL RESERVES OF SELECTED COUNTRIES IN 2009In USD billion
The “so-called” emerging markets are leading the recent recovery These economies established a new benchmark for global economic
development, leveraging their strength on the international arena
GDP PROJECTION Developed Economies
GDP PROJECTIONEmerging Economies
Emerging Markets growth has reshaped geopolitics on a global basis
Source: IMF
Emerging MarketsDeveloped Countries
Return in Emerging Markets reflects investors confidence in the potential of such
economies
MSCI INDEX PERFORMANCE IN 2009
Source: MSCIData as of 28th September 09Note: South Korea is classified as a Emerging Economy by MSCI
MSCI Index represents economic performance and market expectations from the most sophisticated investors in the world
Note: Snapshot of the end of 2008 reveals the full impact of the global financial crisis. In December 2007 Brazil Capitalization was over 80% of GDP and in June 2009 is around 60%.Source: Goldman Sachs Research Report
Spain
USAMalaysia
Chile
South Africa
Australia
Korea India
Israel
Netherlands
Brazil
Canada
France
United Kingdom
Japan
20%
40%
60%
80%
100%
0 5 10 15
GDP (US$ trillion)
Market Capitalization/GDP (%)
Hong Kong
Switzerland
Brazil1H09
Liquidity depth of emerging capital markets is advancing within the G-20 economies
MARKET CAPITALIZATION AND GDP OF SELECTED COUNTRIES IN THE END OF 2008
Emerging Markets sustainable achievements are undisputable and globally recognized
Is such classification still applicable and reasonable? The Brazil repositioning case as a crisis aftermath
ARGENTINA, BRAZIL, CHINA, INDIA, INDONESIA, MEXICO, RUSSIA, SAUDI ARABIA, SINGAPORE, SOUTH AFRICA AND TURKEY ARE ALL G-20 MEMBERS
BRAZILIAN INTERNATIONAL RESERVES NET TOTAL EXTERNAL DEBT TO GDP (%)
PUBLIC SECTOR NET DEBT TO GDP (%) TOTAL CREDIT OPERATIONS TO GDP (%)
Brazil remarkable resilience during the crisis anticipates a huge potential for growth
USD billion
Source: Central Bank of Brazil
NET FOREIGN INVESTMENTS IN THE BRAZILIAN STOCK MARKET IN 2009
USD million
*Up to September 18th
FOREIGN INVESTOR PARTICIPATION IN THE BRAZILIAN STOCK MARKET 2007-2009
USD million
Brazilian excellent fundamentals attract liquidity available after crisis deleveraging
16 billion in 2009
International investors have kept their confidence even under extreme scenarios
Reliable and vibrant markets have sustained a steady flow of foreign investments
Source: BM&FBOVESPA
IPO – CAPITAL RAISED BY SHARES ISSUES IN 2009in USD billion
TOTAL CAPITAL RAISED BY SHARES ISSUES IN 2009in USD billion
Source: WFENote: Up to August
Source: WFENote: Up to August
Regulation, transparency and improved corporate governance have reinforced the Exchange as a promoter of economic development
Raising capital in the Exchange became fashionable and profitable
New capital flows reinvigorate the Brazilian Exchange role in financing development
Emerging markets : an elusive concept that has to be revisited by market practitioners
The financial crisis has provided evidence that :
Some emerging countries have built advanced regulation and effective financial infrastructures that withstand volatile markets more efficiently
Some emerging markets have developed original risk management solutions and transparency rules that better cope with financial institutions leveraging
Some emerging economies have created comprehensive corporate governance rules that promote disclosure more widely
New possibilities for developing capital markets are rising
New models for economic development are shaping
Old fashioned capitalism analytical framework is being challenged
Not every country needs to follow the path of more mature and developed economies
In a multipolar world the name of the game is full and open dialogue, not only East West, but also NorthSouth
There are plenty of lessons to be learned and experiences to be shared
Emerging Market Economies: Does this classification still make sense?
Paulo Oliveira Jr.CEO of BRAiN – Brazil Investments and Business
T: 55 11 3032 1016