Stock Market Capitalization in Developing Countries

An interesting table in The Economist compared the market capitalizations of stock markets in developing nations.  The first surprise is that the top seven stock markets are so close to each other in size.  The next observation is that stock market capitalization has less to do with the GDP of the country than one would expect.  China, which has the largest economy by far among countries on this list, has a smaller market cap than India or Russia.  That Hong Kong and Taiwan approach China in size despite vastly smaller populations makes China look even more surprising.  The large and wealthy diasporas of India and Han Chinese of Taiwan and Hong Kong are also a reason why these countries have market caps larger than their GDPs would suggest. 

In any event, these numbers are dwarfed by the United States, which has a total stock market capitalization of $20 Trillion, or 30 times greater than that of South Korea, India, or China.  One company, General Electric, if placed on this list, would be between Taiwan and Mexico to take 9th place.  And the US market cap grows at 8% a year (without assuming acceleration), which would bring it to $130 Trillion by 2030.  If China or India want to match the US market cap in size by 2030, that means they have to grow at 25% a year for the next 24 years straight. 

This tells you how far any other country is from surpassing the US as an economic superpower.  This will be worth visiting again when one of the countries above crosses $5 Trillion. 

Related :

The Stock Market is Exponential and Accelerating

Why the US Will Still be the Only Superpower in 2030

Comments

[usnjay]

Saw an interesting factoid somewhere that the percent increase in America's economy (GDP) last year was equal to China's entire existing economy.

The next 5 years will be a perfect real-world experiment in which political system is best. 7 countries with widely varying amounts of economic freedom are currently almost equal. It will be very interesting to compare them in 5 years.

[The Summarizer]

Usnjay,

What are those 7 countries?

[GK]

The first 7 in the chart, from SKor to HK.

[dan]

TO usnjay

You may made a mistake. The entire GDP of US is 8 times of that of China (in terms of market value USD). 1% US GDP is the totla growth of China's whole growth (suppose China grows 8%)

[Raj]

Read it.

[Richard Wilson, Hedge Fund Consultant]

I agree. In 5 more years things could be very different. I think the SWF and BRIC trends are going to be affecting all of this as well.

- Richard
Hedge Fund Consulting Blog
http://richard-wilson.blogspot.com

[Hedge Fund Information]

I wonder if China's stock market capitalization takes into account both the "H" shares sold in Hong Kong and the "A" shares sold domestically?

Hedge Fund Blog Man
http://hedgefundblogman.blogspot.oom

[Stock Trading Guru]

I am not sure that stock markets will ever accurately reflect the GDP of a country. So much is based on corporate profits as a share of GDP and growth trends.

Stock Trading Guru:
http://stocktradingguru.blogspot.com

[Ahmad]

The size of the stock markets in my opinion depends on how much capital formation takes place through them. In US, stock markets play a major role in IPOs and capital formation whereas in China and other countries stock markets are primarily used for speculation and not much for capital formation. Most of the financing in these countries takes place through banks. I maybe wrong but this is my analysis.

[David]

China now has equity markets m-cap (excluding hong kong)of 2.74 trillion and India has m-cap of 2.1 trillion.

Source: http://en.wikipedia.org/wiki/Stock_exchange

Table: Twenty Major Stock Exchanges In The World: Market Capitalization & Year-to-date Total Turnover at the end of August 2009

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