Capital Market Developments in EMEs

Abstract

Since the 1970s, financial globalization, financial and technological innovations, restructuring in the financial sector, and expansion of the investor base have led to significant changes in the global financial system. These changes have also influenced EMEs, but on various levels in each country. The aim of this chapter is to analyze the differences and the similarities in the capital markets of EMEs by using the data on the indicators of capital markets from 2000 to 2014. The study uses the most recent data covering all EMEs, including the period after the 2008 global financial crisis. The analysis shows that some important problems in the EMEs are stock market volatility (SMV), bank dominance, stock market concentration, segmentation, illiquidity, short-termism, low saving rates, lack of financial literacy and investor education, and difficulty in the access of Small and Medium Size Enterprises (SMEs) to financing sources using capital markets. However, the stock markets of South Africa, Malaysia, and Chile are more developed when compared to the other EMEs. Bond market development is higher in Chile, Malaysia, and Thailand for private bonds and in Brazil, Hungary, and Malaysia for public bonds. Among the countries under investigation, South Africa, Hungary, and Argentina seem to benefit more from globalization and internationalization of capital markets on the average, as these countries have experienced higher levels of portfolio equity inflows, foreign direct investment inflows, and international debt issuance. As policy suggestions, countries should give importance to macroeconomic stability, building necessary institutional, supervisory, regulatory, and legal framework as well as financial infrastructure. © Peter Lang GmbH.