Mapping global capital markets: Third annual report

By Diana Farrell, Susan Lund, Alex Maasry

MGI's analysis highlights trends in the global financial markets across countries, regions, and asset classes. It finds assets reached $140 trillion in 2005 and, for the first time, provides a detailed look at cross-border capital flows.

In its third annual update on the performance of global capital markets, MGI uncovers several notable developments, including:

  • Global financial stock is now $140 trillion and growing. The value of total global financial assets—including equities, government and corporate debt securities, and bank deposits—expanded to $140 trillion by the end of 2005, an increase of $7 trillion from a year earlier.
  • Eurozone is emerging as a greater force in the global financial landscape. That region added $3.3 trillion of assets in 2005, boosting financial depth to more than three times the eurozone’s combined GDP and reflecting a 6 percent annual growth rate over the last ten years—nearly twice the pace of Anglo–Saxon rivals.
  • The depth of world financial markets rose to an all–time high of 316 percent—more than three times world GDP. With few exceptions, deeper financial markets create better access to funding for companies, a theme confirmed by our survey of business executives.
  • Equities were the top source of recent growth, increasing by $7.1 trillion and accounting for nearly half of growth in global financial assets in 2005. The vast majority of equity market increases worldwide were due to increased earnings and new issuance rather than increases in P/E ratios.
  • Global cross–border capital flows topped $6 trillion, a new record and more than double their level in 2002. Our data shows that foreign investors hold one in four debt securities and one in five equities, suggesting that national financial markets are increasingly integrating into a single global market for capital.
  • 80 percent of capital flows are between the US, UK, and euro area. Although global capital flows to emerging markets are growing rapidly, they still account for just 10 percent of global capital flows.
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