The financial markets of emerging economies have seen a huge growth in the last few years. These markets are attracting large investments from the developed world, especially because of higher expected return. At the same time; investments in emerging markets are considered to be riskier than the other similar investments in the developed market. A major reason for a higher risk is the state of financial markets in emerging economies. In the paper, we would look at the broad characteristics of the financial markets in the emerging economies and see how they are different from the financial market of developed economies.
Banking Industry: There have been many recent developments in the banking Industry in emerging economies, such as competition and consolidation. The developments are being driven by technological innovation, deregulation and changes in corporate behaviour, in some cases accentuated by recent banking crises. Important aspects include privatisation of state-owned banks, mergers of domestic banks and entry of foreign banks. We look into the banking industry and see how far the banking system has developed and what is the road ahead.
Capital Market: Emerging Capital markets are considered to de more volatile compared to the capital markets in developed economies.
[...] This creates unnecessary confusion in the areas of clearing and settlement, as well as buying and selling procedures among securities companies and banks outside China that conduct business with local dealers. Problems of Market participant As CSRC becomes the only government supervisor of the equity market, the contradictions between PBC and CSRC do not exist anymore. While, the problems of different dealers and investors of B-shares market are still there. And the quality of lawyers, accountants and appraisers still needs to be improved. [...]
[...] Insurance will emerge as a large business opportunity with a likely market size of US$20bn in FY07E. Agricultural lending is another large market with Rs2600bn potential. Mergers and acquisitions Economies of scale, Geographical expansion and high quantum of NPA are the major reasons of merger and acquisition The trend towards universal banking may also result in cost savings through sharing physical inputs like offices or computer hardware; utilizing common information systems, account service centres; raising capital in larger issue sizes that reduce the impact of fixed costs; or reusing managerial expertise or information A consolidated commercial bank and insurer may lower total costs by cross selling, using each other's customer database at a lower cost than building and maintaining two databases. [...]
[...] E-bond: Compare with other bond markets and the stock market, the development speed of bond market is obviously slow. There is big disparity in market scale, variety diversification between E-bond market and other securities market. Conclusion Both the Indian and Chinese capital market has to go a long way to make them as developed as the American Capital markets. Both the countries have shown their determination for the development of their capital markets and in the near future they are expected to achieve a considerable growth and development. [...]
[...] Given what we have seen, the comparison with developed markets and the US in particular is quite clear: given their communist history both countries still have a lot of ground to cover before reaching the maturity of the world's most advanced financial markets. The advantage they have is that they can learn from other's mistakes and benefit from advice experts are willing to share. As long as the will remains strong, we believe that both countries could in a foreseeable future catch up. [...]
[...] We restrict our analysis to two emerging markets: China and India and compare these two financial markets with financial market of USA. Capital Market Indian Capital Market Indian capital market has a long history. It started with Bombay Stock Exchange over a century ago and this exchange is of dominant importance for the Indian market. India allowed liberalization in 1991 and it has become an attractive destination for international investors in the last decade. Indian Equity market Indian Equity market has two major exchanges: National Stock Exchange This exchange was started in 1996. [...]
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