Financial hubs to be replaced by 'spider web'
GLOBAL - A de-linking of emerging economies from dependence on the traditional financial market centres of New York and London is taking place and will develop further, delegates at the International Capital Markets Association annual meeting heard in Brussels last week.
The world's economic centre of gravity, which in the mid 1970s was located somewhere in the mid-Atlantic, has now moved eastwards to between Dubai and Shanghai, according to Dr Nasser Saidi, chief economist to the Dubai International Financial Centre. The shift in capital market centres has followed growing production of goods, and oil and gas.
Saidi described the financial crisis and great recession of 2008 as the "end of the US financial empire". This was resulting in a "tectonic movement" away from the "Western-centric" culture.
He said that the financial crisis was contributing to the demise of the hub-spoke model, centred on London and New York. This was giving impetus to a transition to a polycentric "spider web" model.
Whereas in 1999 the US held 46% of capital market activity, by last year this had fallen to 28%. Emerging markets during the same period picked up from a 14% share to 45%.
Saidi said there were now "numerous international financial centres across the globe that have the capital market depth and regulatory sophistication to absorb excess capital from their own regions, as well as from elsewhere".
Potential drivers of the Middle East and Asian debt markets included infrastructure developments, corporate debts, government debt, and mortgage markets for private housing for growing populations with low average ages, he said.
Islamic finance, with a current "nascent" $1trn, would grow to $2trn by 2020. The sector did face challenges before moving up from being a niche market, but its potential was "enormous", Saidi added.