Bugakov G. S., Stukalo N. V., Shkil N. A.
Oles Honchar Dnipropetrovsk National University
STOCK MARKETS GLOBALIZATION
The process of stock markets globalization consists of two determinants – globalization itself and stock market. We will examine them sequentially, beginning from understanding the nature of stock market as economic category.
Taking into consideration different definitions of native and foreign economists, stock market is the market that uses standard market mechanism of supply and demand, but operates with one special type of goods – securities that have there own features, structures, regulations, forms and etc. Stock market is just a type of market, equal to commodity or credit or service market, and all the differences that were mentioned earlier are brought by specialties of traded securities, but not by the nature of the market itself.
Stock trading was growing through years with high rates and from year to year investors from different countries started negotiations on cross-country capital flows to maximize their wealth and capital effectiveness. This process was expanding through the globe by innovative means of communication and developed from integration of several markets to globalization into the world’s stock market.
Financial globalization is a phenomenon, characterized by the growth of international capital flows. Under the term “financial globalization” it is usually understood the growing integration of national financial markets into the single global financial market. At first steps of globalization international financial markets serviced the real sector, hedged currency risks, financed short-term operations, but nowadays international capital flows obtained an independent character. Actually it is the process of transformation into one single market of goods, services, labor force, capital and knowledge.
In our research we have created our own methods of globalization measurement in the context of stock markets. Firstly, we’ll understand what broad-based index is. Broad indexes are, in general, market capitalization-weighted, including a large sample of listed domestic companies, as the all-share or composite indexes. They are generally recalculated to adjust to capital operations and to modifications in the company composition of the index. Secondly, shares of foreign companies in listing and turnover will show us direct measurement of globalization. Actually it will depict how influenced the market is on the foreign companies. And the last of our instruments will be correlation coefficient of broad indexes dynamic.
For this purpose we will choose the biggest stock exchanges from all the regions of the world. The criterion of size will be capitalization of stock market. For more comfortable calculations it will be estimated in US dollars. All chosen exchanges have capitalization more then 1 trillion dollars and represent all world regions. North America is represented by two world’s leaders – NYSE and NASDAQ, South America is represented by Brazilian SE that has dominant impact in region. Asian region is represented by main “Asian tigers” – Japan, China, Korea, India and also Australian SE for Pacific region. And to represent European regions we have chosen stock exchanges of European most developed countries – Germany, Great Britain, Euronext (Belgium, France and Netherlands), Switzerland and Russian MICEX-RTS to represent post-soviet countries.
The majority of foreign companies in listings are situated at NYSE (22,3%) and London SE (21,2%). The smallest amount of foreign corporate papers are placed at Japan SE (0,4%), Australian SE (4,8%) and Hong Kong Exchange (5,5%) the others have middle share near 12%. The biggest share of foreign corporate papers in turnover belongs to London SE (10,6%), then comes NASDAQ (8,2%) and NYSE (7,3%). Another middle group consists of Hong Kong SE (3,6%), Deutsche Börse (6,1%) and Australian SE (3,6%). The others have even less than 1% of turnover.
From these figures flows that actually markets are not so globalized as it was expected and we have understood that big capitalization doesn’t mean that market should have global influence. According to all previous analysis we can conclude that only two stock exchanges are flagmen of stock market globalization process – NYSE and London SE. But if we look at global market, its globalization process has just started and global market itself is only under construction.