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What Tomorrow will be for Capital Market?

 

What Tomorrow will be for Capital Market? A distinctive feature of the modern world economy is globalization which units the subsystems of region trades. Unfortunately, adducing the economics on base ecumenical divider releases the significant improvement standard living.

 

Main driving force considered to be the international movement of capital. Transboundary movement of capital does not occur chaotically, it is organized within international capital market (IRC). Depending on the financial instruments used, considering certain degree of conventionality, the following main components of RTO's can be distinguished:

 

• Securities market - shares and bonds (including government securities);

 

• Money/trade market - concerns firstly international deposit and credit, as well as currency exchange transactions;

 

• The market for derivative financial instruments (derivatives) - contracts that establish rights and obligations with respect to basic (primary) assets - securities, currencies, interest rates, and certain types of raw materials.

 

Overview. Export capital leaders in late of 80's - early 90's were developing manufacturing countries as Taiwan (6% capital exported), Hong Kong (5% ones), China (2.5% ones), etc. At the 70-80-ies period sharply increased the range of loan capital. Analyzing previous decades direct investments prevailed, then at that time the dominant technology became loan. In the 90-ies total situation began to change in favor of securities market again, the scale of operations which are most significant than bank loans limits.

 

The peculiarity of the world capital market in recent decades:

 

a) new directions for exporting capital;

b) new subjects of export and import;

c) changing the motives for exporting capital;

d) changing of purpose and proportion of countries in export and import turnover.

 

Japan was and absolute leader exporting capital at the 80 - 90's. Totally 53% of capital was exported from all other countries. Switzerland holds the second place in exports, which amount was only 8% capital exported. Amazingly United States lose the position of five top exporters. Distinctive feature of recent decades has been the fact that the US, from the largest former capital exporter, has become the largest importer, accounting for about 30%. Next were the United Kingdom (9%) and Canada (8%).

 

According three main components of RTO's, derivatives market called largest having strong activity. The second place is the money market, but main role in structure played by currency exchange market, while the international trade with its deposits and credits is relatively small. Finally, the primary securities market significantly smaller than derivatives and capital markets in concordance with its actives value and dealing frequency.

 

The priority for derivatives market in RTO's can be judged depend on data of its daily turnover in 2007 was 10.3 trillion USD for example, while the daily turnover of traditional currency exchange market (spot transactions) amounted to 1 trillion USD, when daily turnover of major stock exchanges world - 0.4 trillion USD.

 

It reacts Europeans occupy key positions on money market, the debt component of securities market and over-the-counter segment of derivatives market. This, obviously, does not correspond to the generally accepted ideas about leading role of United States in international monetary and financial relations: the Americans are in the lead only in stock market and stock market of derivative financial instruments. However, presence of Europeans is featured quite enough. Japan participation all major capital markets stay limited.

 

What the further forecasts? Generally, last year noticed the strengthening of the yuan. In September, the People's Bank of China set the maximum exchange rate of the yuan to the dollar from May 2016 (6,4997 points), although at the beginning of 2017 dollar was worth about 7 yuan. Then US currency won few positions, but December brings Chinese Central Bank priority again with strengthen the yuan, now its rate is 6.5078 per dollar. Next year expected to be the Chinese economically best year, succeeded promoting yuan as an international currency and liberalizing its capital account, which attract foreign capitals and strengthen the stability of the Chinese currency positions. One of the key factors was the November visit of US President Donald Trump.

 

In 2018, the Chinese capital market amount will be about $ 15-20 billion dollars, business China International Capital Corporation analysts predicted. Latest data from Chinese Center of Foreign Exchange Transactions, the RMB exchange rate index measuring stability of PRC currency against 24 other monetary units, including US dollar, euro and yen, was 94.37 at the end of November 2017 against 94.22 at the end of January.

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