Hong Kong became the world’s most developed financial market, overtaking the US and the UK for the first time, according to the Financial Development Report 2011 published by the World Economic Forum (WEF) on Wednesday.
In Latin America Chile lost its leadership to Brazil dropping from position 30 to 31 while Brazil climbed to 30 from 31. Chile however figures stronger in the institutional environment (23 vs Brazil’s 41) and business environment (27 and 50), But Chile is weaker in IPO compared to Brazil (42 to 9).
But Chile leads in taxing policy and abidance of contracts with a stable banking system (ranked 4 in the world) and low risk in the face of a sovereign debt crisis (5). Chile also is above Brazil in commerce access (8 to 21) but lags in retailing (35 to 21).
At global level Hong Kong’s score was bolstered by strong scores in non-banking financial services such as initial public offering activity and insurance.
Foreign assets in Hong Kong’s Exchange Fund stood at HK$2,169.9 billion (or 278.99 billion dollars) at the end of November, the Hong Kong Monetary Authority said separately on Wednesday.
Launched in 2008, WEF financial development index ranking is based on efficiency and size of banking and other financial services, business environment and financial stability, size and depth of the capital markets, and effective financial intermediation, among a total of 120 variables.
The US dropped from the No. 1 spot as “financial stability continues to remain a concern” there. The UK lost out due to concerns on the securitisation market and IPO activity.
A recent report from the McKinsey Global Institute sees the emergence of an “equity gap” in the future as demand for equity capital by investors will be far lower than corporations’ desire and need to raise equity.
The WEF said that the after-effects of the global financial crisis that began in September 2008 continue to hamper companies’ ability to access capital.
“While Western financial centres are understandably focused on short-term challenges, this report should serve as a wake-up call that their long-term leadership may be in jeopardy,” Kevin Steinberg, COO of the WEF, said in the statement.
About 90% of the countries surveyed are yet to return to levels before the crisis in terms of access to capital, even as financing through local equity markets remains challenging, the report said.
Singapore dropped one rank to the fourth due to securitisation markets drying up and a weak banking system. Australia, Canada and the Netherlands maintained their 5th, 6th and 7th ranks, followed by Japan, Switzerland and Norway.
Other positions include Germany, (14), behind Sweden (11) and France (12) and Belgium (13), while in Latin America Brazil and Chile are followed by Panama (37); Peru (40); Mexico (41); Colombia (45); Argentina (53) and Venezuela (59).