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How markets fare on global map

How markets fare on global map
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First Published: Sun, Dec 02 2007. 11 55 PM IST

Updated: Sun, Dec 02 2007. 11 55 PM IST
Here’s some data on the long way that India’s capital markets have to go. Securities Industry and Financial Markets Association (Sifma) has recently brought out lots of data on the global capital markets. The value of equity shares traded in India in 2006 was a mere 0.9% of the world total. That’s an improvement on the 0.5% of the global market India accounted for during the dog days of 2002, but not much of a change from1997, when it had 0.8% of the market. Arch-rival China’s markets have done much better, with their share in value of equity traded improving from 1.9% of the global total in 1997 to 2.4% in 2006.
According to the World Bank, India’s share of world GDP in 2006 was 1.9%. Contrast, the US share of 49% in value of equity traded with its 27% share in world GDP. Does that mean the gap between the shares of the equity market and the share in world GDP is going to come down as the country develops? Not necessarily—Germany’s share in the value of stocks traded was 3.6% of the world total in 2006, compared with its 6% share in global GDP. But then, Germany’s is a more bank-dependent system, while we’re likely to follow a more market-oriented model.
Our mutual funds have done even worse, accounting for 0.2% of global net assets in 2006, although that’s an improvement from the 0.1% of global net assets they had under their belt at the turn of the century. The big story, the time series on global markets, tells us a slow but steady shrinking of the share of the US and the rise of the emerging markets. Global equity markets cap was $54,195 billion in 2006 and emerging markets had a 19% share of that pie. A decade ago, in 1996, that share was 11%. The share of market cap of the US, 41% in 1996, was down to 36% last year.
The US has lost a lot of market share in underwriting equity issues, its share coming down from 77.1% in 1996 to 35.4% in 2006. All those juicy deals from China are a probable reason.
One last point: notice from the chart how the share of emerging markets China and India fell in 2002, after the dotcom bubble burst. The share of the US, in contrast, rose in that year, only to fall back as the next bull run got under way. Will the same pattern be repeated next year, as a result of the bursting of credit bubble?
Icing on cake for HDIL
The high prices paid last week for plots in Mumbai’s suburban Bandra-Kurla complex have rubbed off on Housing Development and Infrastructure Ltd (HDIL), with its stock going up around 13% in the four days since the auctions. That’s because HDIL has won the Mumbai airport slum rehabilitation project and analysts expect that the high prices paid for properties at the Bandra-Kurla complex will also mean higher selling prices for the properties being developed by HDIL in the vicinity of the airport.
HDIL has built up an enviable reputation in bagging slum rehabilitation schemes (SRS) in Mumbai. These projects are typically long-gestation projects and include dealing with regulators, slum dwellers and a complex web of rules, which act as high entry barriers but also ensure stellar returns. The Mumbai airport project, for instance, involves resettling 85,000 slum dwellers. Sales of FSI/TDRs (floor space index/transfer of development rights) arising from slum rehabilitation schemes accounted for 69% of the company’s revenues in FY07. Nevertheless, more than 90% of the company’s land bank of 124 million sq. ft is outside the SRS, with much of it in the North Mumbai suburbs of Vasai and Virar. With better rail connectivity to these places put in place recently, property values in these regions too should see a spurt.
The icing on the cake, however, is provided by the Dharavi slum rehabilitation scheme, which will redevelop one of the largest slums in the world. The entire slum area of 2.2 million sq. ft has been divided into five sectors for redevelopment. Bidders can get only one sector each, although they can bid for all five. Analysts expect HDIL to be one of the five successful bidders or, at the very least, that the successful bidders will seek the company’s help.
That’s one reason for the stock’s 22% rise in the past month, compared with a 4.2% rise in BSE Realty Index.
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First Published: Sun, Dec 02 2007. 11 55 PM IST