March 2009 International Financial Centres in the post-crash era Vanessa Rossi, Senior Research Fellow, Chatham House.

Slides:



Advertisements
Similar presentations
World Output Fell 1.1% 2008 – 2009, first annual decline in 50 years Central Banks lent money to each other. Governments spent stimulus funds. No restrictions.
Advertisements

Is Asia the next growth engine? Probably, but not if rest of world doesn’t help. One region drags others down, e.g., euro banking problems. IMF: Growth.
March 2009 Future developments in Global Finance and the implications for the industry Paola Subacchi, Research Director, Chatham House.
1 Global Economic Fluctuation and Implications for East Asian Investment Cooperation FENG Xingyan China Foreign Affairs University May 2008.
December 2010 Economic Overview and Outlook Scottish Supply Chain Conference September 2012 Kenny Richmond Scottish Enterprise.
BEYOND LENDING: MDB’S FINANCIAL ROLE AFTER THE CRISIS Guillermo Perry Center for Global Development Innovative Financial Solutions for Development AFD,
Global Dynamism Index (GDI) 2013 summary report Model developed by the Economist Intelligence Unit (EIU)
Washington DC December 8, 2008 WBG Post-Crisis Response For Public-Private Infrastructure Projects Jyoti Shukla Program Manager Public Private Infrastructure.
Lecture 1: Valuation Models for a MNC and a Global Investor Combined with Observations on Exchange Rate Impacts.
Perspectives on U.S. and Global Economy Houston Region Economic Outlook Houston Economics Club and Greater Houston Partnership Omni Houston Hotel December.
The Emerging market economies and the Great Recession Ahmad Seyf Regent’s University London 26 March 2015 University of Cambridge.
Herbert Grubel Professor of Economics (Emeritus), Simon Fraser University Senior Fellow, The Fraser Institute Presentation at the III Astana Economic Forum,
RUSSIAN PRIVATE BANKS – KEY MARKET PLAYERS! Michel Perhirin, CEO, MDM Bank Russian Economic and Financial Forum in Switzerland Seventh Session, Zurich.
Opportunities for Corporate Finance in Latin American Capital Markets John C. Edmunds Professor of Finance Financial Columnist, América Economía March.
A Global Economic and Market Outlook Presented by Chris Caton 15 March 2005.
BEIJING BRUSSELS CHICAGO DALLAS FRANKFURT GENEVA HONG KONG LONDON LOS ANGELES NEW YORK SAN FRANCISCO SHANGHAI SINGAPORE TOKYO WASHINGTON, D.C. The Role.
1 Bernard Droux Chairman Geneva Financial Center.
World Cities Adapted from a presentation by David Palmer & Phil Kline.
Chapter 10 The International Monetary and Financial Environment
Pricing in the world financial markets Husniddin Rahmatullaev.
World Cities. Top Ten Cities,1950 (estimated from various sources) City Pop (in millions) Lat Long New York, USA N 74 W London, UK8.752 N 0 Tokyo,
The Global Economic Environment
1 Current Account. 2 Issues and Applications Global capital markets and the current account Debt crisis in developing countries Sovereign risk.
1 ECONOMICS 3150M Winter 2014 Professor Lazar Office: N205J, Schulich
Economics for Leaders Voluntary trade… creates wealth Any choice creates an… opportunity cost Both individuals and firms compare marginal benefit to… marginal.
Global core and periphery Hong Kong MIKE CLARKE/AFP/Getty Images.
Study initiated by Open Society Forum Team Leader: D. Jargalsaikhan, MBA (Finance), Daniels College of Business, University of Denver, USA Senior Researcher:
Private Banking in Asia and the Philippines 5 October 2012 InterContinental Manila.
© McGraw Hill Companies, Inc.,2000 The Foreign Exchange Market Chapter 9.
Sovereign wealth fund a state-owned investment fund composed of financial assets such as stocks, bonds, property,precious metals, or other financial instruments.investment.
About Schroders At Schroders, asset management is our business and our goals are completely aligned with those of our clients - the creation of long-term.
Copyright  2011 Pearson Canada Inc Why Study Financial Markets? 1.Financial markets channel funds from savers to investors, thereby promoting economic.
1 UN Group Meeting - “Rethinking the Role of National Development Banks” Demian Fiocca Vice President – BNDES December, BNDES:
1 Regional Economic Outlook Middle East, North Africa, Afghanistan, and Pakistan Masood Ahmed Director, Middle East and Central Asia Department International.
FNCE 4070 Financial Markets and Institutions Lecture 8 Financial Markets: A Global Overview.
1 GLOBALOxford Economic Forecasting VANESSA ROSSI, OXFORD ECONOMICS THE GLOBAL ECONOMY IN 2007.
Malaysian Economy and Financial Market Due to the recent increase in fuel prices, inflation as measured by consumer price inflation is expected to exceed.
1 Global Financial Crisis: Implications For Asia David Burton Director, Asia and Pacific Department International Monetary Fund Presentation to the Government.
The world’s new financial brokers Based on the article by Diana Farrell, Susan Lund McKinsey Quarterly, 2008 Number 1 By A.V. Vedpuriswar.
Managing World Cities World Cities: Asian Perspectives Dr. Takashi Tsukamoto University of North Carolina at Greensboro Hong Kong October 23-25, 2008.
Managing World Cities World Cities: Asian Perspectives Dr. Takashi Tsukamoto University of North Carolina at Greensboro Hong Kong October 23-25, 2008.
Notes on International Financial Market Prof. C P Ravindranathan.
Why Foreign Investors are Smarter than Indian Investors? Samir Arora Helios Capital Management December 2010.
Why Are Some Nations Wealthy?
Copyright ©2000, South-Western College Publishing International Economics By Robert J. Carbaugh 7th Edition Chapter 1: The international economy.
Chapter 1 Why Study Money, Banking, and Financial Markets?
Copyright  2011 Pearson Canada Inc Chapter 1 Why Study Money, Banking, and Financial Markets?
INTERNATIONAL FINANCE Lecture 6. Balance of Payment (Accounting of transactions) – Current Account – Capital Account Current Account (Purchase Summary)
Risks of New Global Downturn: Impact on Asia and Response  Lim Mah Hui (Michael)  State of the Global Economy, and Reflections on Recent Multilateral.
Finance (Basic) Ludek Benada Department of Finance Office 533
CHINA AND GLOBALIZATION What is Globalization? Why is it Important for China? What are its Consequences: Structural? and Spatial? What about its timeline?
Internationalisation Strategy Refresh Baseline data analysis Research Team Spring 2016.
Global economic forecast November 1st The economy has started to recover, but growth is heavily driven by short-term factors, such as a stabilisation.
Urban Geography: overview Created by David Palmer Eaglecrest High School.
Mansoor Dailami The World Bank Jakarta, Indonesia June 15, 2011 Mansoor Dailami The World Bank Jakarta, Indonesia June 15, 2011.
What is IPE? IPE= 3 Areas 1. Monetary System (IMS) 2. Trade System (ITS) 3. Investment & Finance (II & IF)
LOGO Globalization A Summary. Contents BRIC Nations Overview Russia India China Brazil.
Lecturer: Jack Wu 吳文傑 Taiwan Economy Lecturer: Jack Wu 吳文傑.
The Global Financial Centres Index
9/8 Update your agenda!.
Michigan Journal of International Affairs
3.5.3 Economic issues affecting international trade
Connecting Customers to Opportunities PUBLIC.
Exchange Rate Policies
LECTURER: JACK WU 吳文傑 Taiwan Economy LECTURER: JACK WU 吳文傑.
Global Financial Crisis: Implications for Future Business Education
Hong Kong as Global Financial Centre: Where We Are? Where We Will Go?
Global Brexit barometer 2018
Global Financial Crisis: Implications For Asia
Exchange Rate Policies
Presentation transcript:

March 2009 International Financial Centres in the post-crash era Vanessa Rossi, Senior Research Fellow, Chatham House

Overview The global recession and financial storm has not yet abated – a stress test of survival The crisis has highlighted the massive increase in balance sheet risks compared with national incomes Iceland marked the end of the “small country-big bank” model of global finance Yet banks will become more important as financial intermediaries if saving deposits rise and retail investors shun risk: the “Tokyo scenario” 2

3 World trade smashed by storm Exports in US $ trillion: 2007 data versus 2009 estimates 2009 may be down 20-30% versus 2007 data – larger losses for Japan and the energy exporters Source: WTO

Risk averse High growth and inflation Low growth and inflation Investment trends: exodus from risk creates global asset imbalance Risk taking The US: “The Anglo Saxon Model” US financial wealth was $60-65trn, over 4x GDP Under 15% of household wealth in bank deposits, as much as 50% in equities and corporate bonds JAPAN: Cash Wealth $30 trn Nearly 55% of household wealth in bank deposits The EU: “Balanced Portfolio” Total financial wealth similar to US But household wealth held in equities lower

Holdings of debt, equity and deposits 2008 – shaded areas represent estimated losses in equity values by March 2009

Wealth losses almost 1 year ’ s GDP - equities shrink, role of government rises WORLD FINANCIAL WEALTH TOTAL SHRINKS FROM $200 TO $160 trillion? BANK DEPOSITS and CASH around $70 trillion Larger than world GDP of $55 trillion EQUITIES - OTHER ASSETS VALUE FALLS From peak $65 to $35trillion? GLOBAL TOXIC ASSETS $3-5trillion? TOTAL BONDS VALUE DOWN FROM $65 to $55 trillion Government share up from 50% to 60-65% Government debt up, corporate bonds fall

Implications: Big banks: few “global players”, a cluster in the US, China and Japan and, arguably, the Gulf region backed also by “oil deposits” Europe - cross-border issues? Other IFCs will have to focus heavily on financial services with low balance sheet exposure – stiff competition London may be the most affected of the major financial centres – this crisis is the banking equivalent of previous restructuring in reinsurance and Lloyds of London 7

Japan ’ s banks: expand assets abroad liabilities assets JAPANESE BANK DEPOSITS TOTAL $10 trillion PRIVATE SECTOR LOANS $5 trillion FOREIGN ASSETS $2 tn LIABILITIES $1 tn Prudential reserves $0.2 trillion LOANS TO GOVERNMENT $3 tn about 35% of Gov Debt

China ’ s banks: “ cash ” now mobilised liabilities assets CHINESE BANK DEPOSITS TOTAL $ trillion PRIVATE SECTOR LOANS $5 trillion FOREIGN ASSETS $0.3 tn LIABILITIES $0.1 tn Prudential reserves Over $1 trillion LOANS TO GOVERNMENT $0.5 tn about 100% of Gov Debt Policy easing

10 Economic ranking by size of GDP – which countries are big enough? GDP estimates ($ tn) RankRegion EU (inc UK)1725 2US1421 3Japan4.47 4China Canada, Brazil, Russia, India, Korea 1-1.5(India) 3 =10GCC total, Mexico, Australia0.8-1(avg.) ~2 World total

Comparison of GDP and Stock Market Capitalizations as Shares of World

Shares of World GDP (%) (chart data at 1990 constant prices, own estimates) China the only economy gaining share It is the only sizeable contender of the BRICs Stock market capitalisations will broadly follow these GDP trends

Japan’s shares in world economy and markets Japan’s shares in world wealth and other market indicators much larger than share in global GDP

Japan is the 3rd largest bond market Larger share in global bonds than equities: approx 15% versus only 8% share of world GDP and equities

Holding of JGBs by foreign investors trend up but still low, close to $0.5 trillion

Potential growth in foreign investment in Japanese markets High estimate: bond holdings rise to match equity stakes Low estimate: no increase in holdings except for modest increase in equity investments based on maintaining share of market

17 The Asian debt market should expand Critical to rebalance global asset demand and supply and to fund development in low savings countries such as India, Bangladesh, Vietnam Potential to grow dramatically - possibly $1trillion pa? Japan would be a key participant here e.g. Samurai bonds: “rare oasis” during credit crunch. Froze after Lehman collapse but reopened in February: $2.2bn (Westpac), $1.5bn (Indonesia)

18 MARKET OPINION?

The March 2009 City of London Survey: Tokyo and Sydney drop below top 10 GFCI4 (Fall 2008) 1London 2New York 3Singapore 4Hong Kong 5Zurich 6Geneva 7Tokyo 8Chicago 9Frankfurt 10Sydney 23Dubai 27Melbourne 34Shanghai 43Bahrain 45Qatar GFCI5 (Spring 2009) 1-London 2-New York 3-Singapore 4-Hong Kong 5-Zurich 6-Geneva 7+1Chicago 8+1Frankfurt 9+2Boston 10+3Dublin 15-8Tokyo 16-6Sydney 23-Dubai 28Melbourne 35Shanghai 19

Recommendations regarding the City of London Surveys Two possibilities for consideration: (1) The report may be more widely understood and accepted as a barometer of IFCs performance and strength if it were to adopt a two-pronged strategy and rankings: Firstly comparing countries’ leading international financial centres (ex: London, New York, Tokyo) Secondly comparing secondary (regional or niche) financial centres around the world (ex: Chicago, Geneva, Channel Islands) This might help focus attention on the most critical factors in the international surveys and underlying changes in view. (2) Greater methodological weight could be placed on the size and development of financial sectors rather than on “ease of access” type factors. We agree that it is important to preserve the nuances brought into the survey by the direct personal input of market participants and these are not an issue.

GFCI5 divided into international and secondary centres: more representative GFCI5 - International 1London (UK/Europe) 2New York (US/Americas) 3Singapore (SE Asia) 4Hong Kong (China/SE Asia) 5Zurich (Switzerland/Europe) 6Frankfurt (Germany/Europe) 7Toronto (Canada) 8Tokyo (Japan/Asia) 9Sydney (Australia/Pacific) 10Paris (France/Europe) 21 GFCI5 - Secondary 1Geneva 2Chicago 3Boston 4Dublin 5Guernsey 6Jersey 7Luxembourg 8San Francisco 9Isle of Man 10Edinburgh

Other rankings: looking beyond IFC competitiveness surveys WEF Financial Development Report United States 2United Kingdom 3Germany 4Japan 5Canada 6France 7Switzerland 8Hong Kong 9Netherlands 10Singapore PWC – Cities of Opportunity (Financial clout – 11 cities) 1New York 2London 3Paris 4Tokyo 5Frankfurt 6Toronto 7Chicago 8Atlanta 9Los Angeles 10Singapore MasterCard – Worldwide Centers of Commerce London 2New York 3Tokyo 4Singapore 5Chicago 6Hong Kong 7Paris 8Frankfurt 9Seoul 10Amsterdam

23 THANK YOU