Transcript GLOBAL LEADERSHIP IN THE FINANCIAL MARKETPLACE

Emerging Market Economies:
Does this classification still make sense?
Panel 4 – Developing Economies
World Federation of Exchanges
Paulo Oliveira Jr.
Chief Business Development Officer
Emerging Markets: AWorld Bank definition and
the conventional wisdom to be challenged
The World Bank classifies member economies according to
gross national income (GNI) per capita
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
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
 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
INTERNATIONAL RESERVES OF SELECTED COUNTRIES IN 2009
In USD billion
GDP OF SELECTED COUNTRIES IN 2008
In USD billion
United States
14,264
China
7,916
Japan
India
Germany
4,354
3,288
2,910
Russia
2,260
United Kingdom
2,230
France
2,130
Brazil
1,982
Italy
1,814
Mexico
1,548
Spain
1,397
South Korea
1,342
Source: IMF
Developed Countries
Emerging Markets
Source: IMF and ECB (Jul09 and Aug09)
Emerging Markets growth has reshaped
geopolitics on a global basis
 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
12.0%
8.0%
4.0%
0.0%
-4.0%
-8.0%
France
Germany
Italy
2008
2009
Japan
2010
Korea
2011
2012
Spain
2013
United Kingdom United States
2014
GDP PROJECTION
Emerging Economies
12.0%
8.0%
4.0%
0.0%
-4.0%
-8.0%
Brazil
Source: IMF
China
2008
India
2009
2010
Mexico
2011
2012
2013
Russia
2014
Turkey
Return in Emerging Markets reflects investors
confidence in the potential of such economies
 MSCI Index represents economic performance and market expectations from
the most sophisticated investors in the world
MSCI INDEX PERFORMANCE IN 2009
95%
83%
82%
Developed Countries
Emerging Markets
76%
63%
59%
57%
55%
44%
43%
39%
29%
18%
7%
Brazil
Russia
India
Turkey
Korea
Chile Australia Taiwan
Source: MSCI
Data as of 28th September 09
Note: South Korea is classified as a Emerging Economy by MSCI
China Canada Malaysia United
Kingdom
USA
Japan
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
Market Capitalization/
GDP (%)
Hong Kong
Switzerland
100%
South Africa
80%
United Kingdom
USA
Malaysia
Canada
Chile
60%
Australia
Japan
Brazil
1H09
France
Korea India
40%
Israel
Brazil
Netherlands
Spain
20%
0
5
10
15
GDP (US$ trillion)
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
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
Brazil remarkable resilience during the crisis
anticipates a huge potential for growth
BRAZILIAN INTERNATIONAL RESERVES
NET TOTAL EXTERNAL DEBT TO GDP (%)
216
USD billion
180
35
32.7
30
194
25
20
15
86
36
33
36
49
38
53
54
10
5
-2.1
0
-5
PUBLIC SECTOR NET DEBT TO GDP (%)
TOTAL CREDIT OPERATIONS TO GDP (%)
60
50
55
45
45
50
43.2
45
40
Source: Central Bank of Brazil
jul-09
mai-09
mar-09
jan-09
nov-08
set-08
jul-08
mai-08
mar-08
jan-08
nov-07
set-07
jul-07
mai-07
mar-07
jul-09
dez-08
mai-08
out-07
mar-07
ago-06
jan-06
jun-05
nov-04
abr-04
set-03
fev-03
jul-02
dez-01
mai-01
out-00
25
mar-00
30
ago-99
30
jan-99
35
jan-07
35
40
Brazilian excellent fundamentals attract
liquidity available after crisis deleveraging
 International investors have kept their confidence even under extreme
scenarios
 Reliable and vibrant markets have sustained a steady flow of foreign
investments
NET FOREIGN INVESTMENTS
IN THE BRAZILIAN STOCK MARKET IN 2009
USD million
FOREIGN INVESTOR PARTICIPATION
IN THE BRAZILIAN STOCK MARKET 2007-2009
USD million
40.0%
6,083
16 billion in 2009
35.0%
3,778
2,686
30.0%
2,209
1,654
1,441
25.0%
544
jan
fev
mar
-646
*Up to September 18th
Source: BM&FBOVESPA
abr
mai
jun
-1,093
jul
ago
set*
20.0%
New capital flows reinvigorate the Brazilian
Exchange role in financing development
 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
IPO – CAPITAL RAISED BY SHARES ISSUES IN 2009
in USD billion
Shanghai SE
9.2
TOTAL CAPITAL RAISED BY SHARES ISSUES IN 2009
in USD billion
London SE
BM&FBOVESPA
3.7
Australian SE
Hong Kong Exchanges
3.6
Hong Kong Exchanges
London SE
1.8
Tokyo SE
NYSE Euronext (US)
1.8
BM&FBOVESPA
92.1
47.0
41.1
30.4
25.9
BME Spanish Exchanges
1.6
Shanghai SE
23.2
NASDAQ OMX
1.5
Borsa Italiana
22.5
National Stock Exchange India
0.7
BME Spanish Exchanges
Australian SE
0.3
NYSE Euronext (US)
Korea Exchange
0.2
Johannesburg SE
Source: WFE
Note: Up to August
Source: WFE
Note: Up to August
15.2
10.3
9.7
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 NorthSouth
 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
[email protected]
www.brainbrasil.org
T: 55 11 3032 1016