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Global Capital Markets A Peek 

Global Capital Markets A Peek 


The global debt market’s size stood at $296 trillion by Q3, 2021, reducing slightly after reaching an all-time high in Q2, 2021 ($296 trillion)  according to the Institute of International Finance. About $4.8 trillion of debt was added in Q2, 2021 with the global debt to GDP ratio declining significantly, a boost to an already leveraged economy.

The Global Bond Market remains the largest asset class in 2020 with global bond outstanding value at ~ $123.5 trillion compared to Global Equity Market Capitalization at $105.8 trillion based on the data shared by SIFMA. 2021 Capital Markets Fact Book by SIFMA estimates last year, the global equities issuance decreased by 52.9% to $826.8 billion compared to the global long-term bond issuance, which increased by 19.9% to $27.3 trillion.  

Fig break up of US fixed income securities


The US capital markets remain the largest in the world both in equity and debt capital markets. US fixed income markets stood at 38.3% of the $123.5 trillion securities outstanding across the globe and 38.5% of the $105.8 trillion equity markets. In 2020, the Treasury and MBS were the largest issuers of outstanding fixed income securities in the US. 

# Global Equity Capital Markets 

The global equity market stood at $105.8 trillion with US share at 38.5% followed by China at 17.4%. The share of the other emerging markets peaked at 18.2% in 2010 coming down to 9.5% as percent of the total global capital markets.     

Selected Equity Market Capitalization of selected countries Market Value | Data Source World Federation of Exchanges ; updated on 08-06-2021

# Global Debt Capital Markets — A Lost Decade 


The US, EU, and China are the three most dominant players in the global bond market with a percent share of total global markets at 38.26%, 20.43%, and 15.48% respectively in 2020. 

Looking at data shared by SIFMA, since 2006 China (ex- Hong Kong) as a percent of the global bond market has increased from 2.1% to 15%, a whopping increase of ~614%. This is a huge contrast to the share of other emerging bond market size as a percent of the global bond market that ranges between 1.1% to 1.5%, highlighting the stagnancy in tapping debt capital markets. The data could highlight the lack of depth within the debt capital market over the previous decade in other emerging markets.  

Chart : Data updated as of 09-06-21

The last decade is a missed opportunity by many emerging markets to develop a well rounded ecosystem for corporates for raising capital and financial innovation through covered bonds, mortgage and asset back securities, and other structured financial instruments. Debt capital markets are a huge enabler for sovereigns, municipals and corporates to raise capital especially during an era of unusually low interest rates and ample liquidity. At the same time, an increase in size of  debt capital markets could be a signal of higher leverage within an economy example Debt to GDP ratio. 

A look at international security findings by all issuers by market value suggests a huge skew towards debt markets with debt at ~90.28% of total ~ $4.095 trillion international security offerings by all issuers. Straight debt was ~96% of total debt last year, showcasing preference of investors of straight debt over convertible debt.   

The figure is even more lopsided for common stock, common stock is ~98.4% of total equity.  Investors still prefer vanilla debt in fixed income. 

data sourced from 2021 Capital Markets Fact Book SIFMA.
Note: The $296 trillion value is corrected for Q3 2021, as previous stated for end of Q2, 2021.

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