Sunday, October 30, 2005

An alternative capital magnet

The US stock and other (commodities, futures) exchanges have been able to attract most of the investing capital from around the world for a long time now and no one seems even to think of the possibility that this may not remain so much longer.

As with a number of my other ideas leading to posts, I use daily exchanges/conversations to gauge reaction to such possibilities. The more ridicule an idea receives, the more chances of it materializing. On that scale, I think this is a winner. I initially was planning to write that the US exchanges will lose their global leadership in 3 or 4 decades. I am using the nature of the reponses to reduce that timescale to under 2 decades.

Already, the world's biggest IPO in the last 5 years, that of China Construction Bank, was on the Hong Kong Stock Exchange! Among the reasons cited for not having the $8 billion IPO on NYSE - Sarbannes-Oxley and the associated cost of being a public-company. Not expressly stated, but fears of capital controls down the road was definitely a factor as well.

Another, mostly unnoticed, event was the opening of the Dubai International Financial Exchange - more here. This, with all the liberal finance laws, has the potential to turn into something big. Even a small success will lead to opening of similar exchanges in the half-a-dozen or so smaller, relatively-liberal emirates.

What the economic observers in the US derivisely call as the savings glut in Asia and the Middle East, will turn out to be just one factor in making these the pre-eminent exchanges down the road.

You read it here first!


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