Sunday, November 09, 2008

Comparing international financial centres

The City of London has released two interesting documents:

In terms of methodology, GFCI 4 uses 57 factors, including responses from 24,014 people drawn from 1,406 financial firms in a survey. To participate, go here and click on `Take the survey now'. And, see the wealth of information that's been harnessed on page 15 and page 16 of GFCI 4.

Here's a comparison of what the 1st and 4th editions are saying:

CityMar 2007Sep 2008Change
London 765 791 +26
New York 760 774 +14
Singapore 660 701 +41
Shanghai 576 568 -8
Dubai 570 597 +27
Beijing 513 509 -4
Qatar 525
Bombay 460 497 +37

To be the 10th ranked city, the score (4th edition) has to be 630. Bombay's rank stands at 49.

The world of finance is undergoing great turbulence. It'll be interesting to see how the cities stack up in GFCI 7. GFCI 5 will be published in March 2009.

3 comments:

  1. Dr. Shah,

    Why is Hong Kong excluded from that list? I apologise if it is in the data source I haven't got time to look at the report. But it is the pre eminent Asia Pacific financial Centre, it is the preferred exchange for major Chinese Companies who wish to raise capital from international investors and list their stock. A list like that is incomplete without it.

    Tokyo may be larger, but speaking as a biased Hong Konger, that list is incomplete, in fact Shanghai shouldn't be on there, it is a tiny domestic market with even less FII participation than Mumbai, For now from an international perspective if you want exposure to mainland equities you buy them in Hong Kong.

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  2. Sharat,

    I love Hong Kong myself. There is no other place in East Asia where I, personally, feel more comfortable. It has a freewheeling culture that reminds me a lot of Bombay at its best.

    And, I know that when it comes to India-related finance, Hong Kong has some awesomely smart people doing awesomely cool things.

    My fear is that in the larger scheme of things, China will not allow Hong Kong to flourish. They will use the levers of power to push finance to Shanghai. Hence, when I look forward, I feel gloomy about the outlook for Hong Kong and treat Shanghai as the natural challenger.

    I would be happy to be proved wrong, of course. But that's my reading of how the Chinese government plans to play things.

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  3. Hi Dr. Shah,

    Thanks for coming back to me, I have grown very fond of your blog and I come here often now.

    My personal view, the Chinese government need to establish rule of law and property rights in that country first before Shanghai can think of usurping Hong Kong's role in terms of capital raising.

    Currently their legal system is woefully inadeqaute and international investors will be skittish. That is the reason Hong Kong will stay the dominant financial centre of China for probably at least next two decades at least. That is what that city is banking on in fact, if it lost it's role, it would have almost no comparative advantage left.

    In the immediate term, the Hong Kong dollar is fully convertible and whilst that is the case and the RMB is not, the major Chinese issuers will opt for a listing in that market rather than Shanghai.

    More importantly over the longer term, as a former British colony, there is rule of law based on common law with property rights established and enshrined and an already functioning world class legal system.

    Investors will have more certainty with a Hong Kong listing than they do with a Shanghai listing.

    Shanghai is a wonderful and remarkable city and an emblem or symbol of the change they have achieved, and it is clearly the economic heart of china, but its financial capital will be Hong Kong for some time to come. Perhaps that will indeed change in the future, but they need to do a lot of work in order to achieve that, kind of like what our country has to do with our infrastructure, we all know it needs to be done, but for some reason there seems to be lack of political will.

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