MGI provides a comprehensive map of global capital markets in the early stages of the financial crisis, drawing on three proprietary databases that cover the financial assets, cross-border capital flows, and foreign investments of more than 100 countries since 1990. In addition to providing insights into broad long-term trends shaping global capital markets, the research examines how the crisis affected parts of the U.S. private debt market through September 2008.
MGI found that global capital markets grew strongly in 2007, slightly below the pace of 2006 but still faster than the historical trend—likely marking the recent peak for equity and private debt markets.
Global financial depth, or the ratio of financial assets to GDP, rose to 359 percent in 2007 from 345 percent the year before. With the exception of government debt, all asset classes grew deeper. While deeper financial markets are generally beneficial, at times financial deepening can be the result of unhealthy increases in government debt levels or asset market valuations—either of which can lead to painful corrections. The current sharp correction in the U.S. and European private debt markets is one stark example.
Accompanying financial asset growth in 2007 was an acceleration in total cross-border capital flows, which rose to $11.2 trillion. These flows are likely to decline as the credit crisis continues, reflecting the evaporation of interbank liquidity.
The research also examines several long-term trends. Emerging-market financial systems continued to expand rapidly in 2007. Although developing countries represented just 20 percent of global financial assets, they accounted for nearly half of the financial asset growth in 2007. In addition, as more markets gained scale and liquidity, capital flowed to new financial centers, from Madrid to Mumbai and from São Paulo to Shanghai. Companies in these markets were increasingly raising funds from both foreign and domestic investors.
Global capital markets: Entering a new era World financial assets fell by $16 trillion to $178 trillion in 2008, marking the largest setback on record and a break in the three-decade-long expansion of global capital markets. Looking ahead, mature financial markets may be headed for slower growth, while emerging markets will likely account for an increasing share of global asset growth. Read more
The new power brokers: How oil, Asia, hedge funds, and private equity are faring in the financial crisis While the power brokers' collective performance in the financial crisis was better than the sharp declines in wealth of most institutional investors, it masks an important shift: Asian sovereigns and petrodollar investors emerged as more influential than ever, while hedge funds and private equity saw their previously rapid growth interrupted. Read more
The new power brokers: Gaining clout in turbulent markets Four financial market power brokers—Asian sovereign investors, petrodollars, hedge funds, and private equity firms—have grown in size and clout during the financial crisis that began in mid-2007. The crisis underscored one of the biggest benefits offered by the power brokers: vast pools of liquidity. Yet risks remain. Read more
The new power brokers: How oil, Asia, hedge funds, and private equity are shaping global capital markets Even under the best circumstances, the assets of the new power petrodollars will nearly double to as much as $15.2 trillion by 2012. Read more
Leading through uncertainty As consumers batten down the hatches and the global economy slows, senior executives confront a more profoundly uncertain business environment than most of them have ever faced. Companies that nurture flexibility, awareness, and resiliency are more likely to survive the crisis, and even prosper. Read more
