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Estimates of world-wide GDP for 2009 from the multilaterals report shrinkage of about 0.5%, with developing or emerging economies (there is no consensus on what word to use) clocking up growth of 2.5%; and the contrast between developed and developing economies continues into 2010, with a consensus forecast for developing country growth of 6.1% outshining developed country growth of just 2.3%.

A year ago, the World Bank thought that emerging markets would growth of 4.4% growth in 2010, so they are doing better than expected, with the 'advanced' countries doing worse than expected.

FDI flows to emerging markets have mirrored the global financial meltdown, of course, but they haven't reversed, or anywhere near it. Total world FDI of USD1.7 trillion in 2008 fell to USD1.0 trillion in 2009, a drop of 39%, with developing country FDI more or less showing the same amount of shrinkage as in developed countries. The prospects for 2010 are more encouraging, with some sort of bounce-back expected, especially in emerging markets.

What Exactly Is An Emerging Market?

Many international agencies consider all non-high income countries to be "Emerging Markets", stressing the potential of all nations to develop. Others include only those countries that meet certain levels of economic development and in which local equity and debt markets are operating. In general, Emerging Markets countries are characterized by an underdeveloped or developing commercial and financial infrastructure, with significant potential for economic growth and eased capital market participation by foreign investors. Countries generally considered to be Emerging Markets possess some, but not necessarily all, of the following characteristics:

• Per capita GNP of less than US $9,656 (a World Bank definition of low- and middle-income economies);
• Recent or relatively recent economic liberalization (including, but not limited to, a reduction in the state's role in the economy, privatization of previously state-owned companies, and/or removal of foreign exchange controls and obstacles to foreign investment);
• Debt ratings below investment grade by major international ratings agencies and a recent history of defaulting on, or rescheduling of, sovereign debt;
• Recent liberalization of the political system and a move towards greater public participation in the political process; and
• Non-membership in the Organization of Economic Co-operation and Development (OECD).

Countries that are usually considered classic examples of Emerging Markets include Argentina, Brazil, India, Mexico, China, Central and Eastern European nations and Russia. Others that may be considered borderline cases, possessing fewer of the above characteristics, include Greece, Portugal, and Turkey.

Countries which meet many of the definitions above, but which have not yet been the focus of significant foreign investment, are often referred to as "pre-Emerging Markets" or "emerging Emerging Markets". These countries include most of Africa, some Central American nations, and a number of the former Soviet republics.

Many commentators think that most emerging markets are in fact in a far better position to achieve long-term growth than their developed peers and competitors, with their massive debt burdens, high social costs and shrinking tax bases. The relatively 'coupled' behaviour of the twin worlds of developed and developing economies, which has been the pattern of the global economy in recent years may in fact be going to revert to the picture that was more usual in the middle decades of the twentieth century, when the developing countries put up a solid performance year after year, in sharp contrast to the turgid behaviour of most of the larger developed countries. What was true then is perhaps truer now than ever: that it is far easier for the less-developed economies to make massive productivity gains, while at the same time benefiting from increasing populations.

The Recovery From Meltdown In 2008

HSBC's Emerging Markets Index has charted the bounce-back of emerging markets during 2009 and 2010, showing that they have recovered much more quickly than the developed economies from the problems of 2008, although EM growth softened in Q2 of 2010, with the Index slipping to 55.8 from a high of 57.4 in Q1.

'Manufacturing growth in the emerging markets slowed sharply from a record pace set in Q1 of this year', said HSBC. 'Although output remains above the long-term average, it is below the average seen before the financial crisis. This easing reflects a moderation in the rate of growth of new orders, especially for manufacturing exports. And with developed nations showing few signs of domestic demand and about to enter a period of fiscal retrenchment, world trade is likely to soften further.'

Stephen King, HSBC’s Chief Economist, said: “We are in a new phase of global economic development. Export gains for companies in the
emerging world have failed to sustain the momentum seen in earlier quarters. The stellar recovery in economic activity across most of the
emerging markets seen since the first half of 2009 finally hit a bump in the road. The good news is that emerging markets, having escaped the legacy of excessive debts, should not face the same kinds of financial constraints which will keep the lid on economic activity in the developed world in the
years ahead.”

Not only does the future look brighter now for emerging markets, but they also performed more robustly than the 'first world' in 2008 and 2009. In its April, 2008 Global Financial Stability Report, the IMF worried that financial problems had spread beyond the US subprime market to the prime residential and commercial real estate markets, consumer credit, and the low- to highgrade corporate credit markets, but remarked that emerging market countries had been broadly resilient. However, said the IMF, some remained vulnerable to a credit pullback, especially in those cases where domestic credit growth had been fueled from external funding sources and large current account deficits needed to be financed. Further shocks to investors’ risk appetite for emerging market assets could not be ruled out if financial conditions worsened, said the IMF.

Well, they did worsen, yet the emerging markets were more resilient than anyone expected, except perhaps in those countries themselves.

According to a mid-2008 report from PricewaterhouseCoopers, CEOs of companies in emerging markets around the world were confident they could maintain high rates of growth funded primarily from internal resources rather than relying on outside investment.

The report from PwC, entitled "Convergence & Differentiation: What is success in a connected world?", was launched at the World Economic Forum’s meeting on Latin America in Cancun in April, and suggested that growth in emerging markets was outstripping that of developed nations, blurring traditional economic distinctions.

In addition to the well-established emergence of the BRIC economies (Brazil, Russia, India and China), intra-regional trade and investment is fuelling explosive growth in such countries as Indonesia, South Korea, the Philippines, Singapore and Thailand, the report stated.

"The economic strength and confidence of the emerging markets could at least partially offset the impact of economic slowdowns in the developed world. The flow of capital, goods and labour among emerging economies is now growing faster than trade between emerging nations and developed countries," observed Samuel A. DiPiazza Jr., Global CEO of PricewaterhouseCoopers.

He continued: "The expanding connections of the economies in the developing world could insulate them from the worst impact of a downturn in the US and Western Europe."

The report noted that since 2000, emerging markets have run a current account surplus and have exported capital to the rest of the world.

Emerging markets have also driven the number of initial public offerings (IPOs) to record levels worldwide, with 70% of all IPOs in 2007 coming from emerging economies.

Emerging economies now also account for 45% of world exports, and have amassed 75% of all foreign exchange reserves.

CEOs of companies in emerging economies identified a number of risks to continued growth. They noted that a slowdown in the developed world could slow commodity exports, while fallout from the credit squeeze in the United States could impact local financial markets.

Longer term, CEOs in emerging market countries were sensitive to the potential impact of global climate change. Emerging-market CEOs believe more strongly than their counterparts in developed economics that governments should take a leadership role in determining strategies to combat global warming.

They believe that the developed world should accept more responsibility for the costs to correct its impact, an opinion shared by CEOs in the developed economies.

Asked how they would fund growth, most CEOs from emerging-market economies said they would rely on internally generated cash flow.

The debt market ranked a distant second as a source of capital. The equity markets, divestiture of existing assets, and accessing private equity and venture capital ranked far behind.

Of the 14 CEOs interviewed in-depth for the report, none said that access to capital was a barrier to growth, citing their company's strong credit ratings and a continued influx of foreign capital.

The PwC report identified three sets of "strategic drivers" that contribute to the success of companies in emerging markets and enable them to differentiate themselves in an increasingly converging world.

These differentiators are asset-driven, including financial strength, brands and people; process-driven, including supply chain and innovation; and organisation-driven, including governance and structure.

Ironically, the report found that often the very factors that make companies in emerging markets unique and successful are viewed by some outsiders as limitations.

For example, because emerging markets once faced difficulties in attracting capital, companies became adept at building internal capital reserves and maintaining healthy credit ratings. They also developed disciplined financial structures that serve them well today as their home markets grow quickly and attract foreign investment.

The report also addressed cultural, structural and business networks components of organisations.

It found that in some cases, traditional "command-and control" structures associated with family enterprises gives them the agility necessary to succeed in the current business environment.

Also, according to the report, most emerging market CEOs perceive government as more of an obstacle than a pathway to private-sector development. Emerging-market CEOs more strongly factor in regulatory concerns when making business decisions than do their counterparts in developed economies.

Yet, 30% of emerging market CEOs believed that current governments were creating a business-friendly environment, slightly higher than the 24% of CEOs from developed economies who thought likewise, the PwC report concluded.

Deutsche Bank also noted the robust performance of emerging markets investments, announcing the results of its sixth annual Alternative Investment Survey, which was conducted during March 2008 by the Bank's Hedge Fund Capital Group.

Over 1,000 respondents from 500 institutions responded to the 2008 survey, including banks, corporations, insurance companies, consultants, family offices, high net worth individuals, wealth management companies, funds of funds, pensions, endowments and foundations.

"Hedge fund investors' prediction that the Middle East and North Africa will be the top performing region in 2008 indicates a clear redistribution of capital towards emerging markets," commented Sean Capstick, London-based Co-Head of the Hedge Fund Capital Group.

He continued: "The survey also shows that the number of early stage investors has fallen by 25 percent in the past year, making 2008 a more challenging environment for startup funds."

"Hedge fund investors are cautiously poised, as shown by their increased focus on risk management and plans to allocate to strategies which are not sensitive to equity market risk," noted Maarten Nederlof, New York-based Co-Head of the Hedge Fund Capital Group. "We also found that despite their overall bearish outlook on the economy, investors predicted more than USD200bn will flow into the industry."

The majority of investors surveyed planned to increase their allocations to emerging markets, with the Middle East as the predicted top performer amongst all regions.

Despite the bullish noises that continue to surround emerging market performance, look back a few years, however, and you'll come up against a scary series of defaults and emerging market crises such as the Russian debt default in 1998, which brought down one of the world's largest hedge funds in Long Term Capital Management and sparked fears within the US government of a meltdown in the banking system. Other examples are the Asian financial crisis of 1997/1998 and Argentina's debt default in 2001. Even the jailing of former Yukos CEO Mikhail Kordokovsky on fraud and tax evasion charges in October, 2003 caused the entire Russian stock market to fall 15% in one week.

Could it happen again? That's the question a long-term emerging markets investor has to ask, and that's the issue that underlies the persistent discount of emerging markets stocks to those in the developed world. In terms of indices, at least, the answer seems to be positive. Hedge funds investing in emerging asia posted gains in March and April, 2009, with the HFRI Emerging Markets: Asia ex-Japan Index gaining over 8.5% year to date through April, inclusive of a 7% gain in the month April.

The volume of investment doesn't show up so well, however. Despite the recent gains, investors withdrew USD9bn from hedge funds investing in Asia in the first quarter of 2009, according to data released on May 13 by Hedge Fund Research, Inc., a leading hedge fund industry data provider. Total capital invested in the Asian hedge fund industry fell to USD65bn at the end of Q1, approximately USD45bn below the record level achieved at the end of 2007. Globally in the first quarter, investors withdrew more than USD103bn from hedge funds, reducing total industry assets to USD1.33 trillion.

As a result of positive performance in Q1, funds investing exclusively in Emerging Asia or across both Emerging Asia and Japan posted a performance-based asset gain of over USD2.6bn. Hedge funds investing in Emerging Asia posted gains in three of the first five months of the year, after losses of nearly 33.5% in 2008. Funds focused solely on Japan, by way of comparison, generated a performance-based asset loss for the quarter of approximately USD575m.

Even Russia, which has seen shattering falls in its equity indices, is being seen in a more positive light. The Russian Private Equity Survey 2009, conducted by KPMG, showed that 73% of international respondents thought that Russia would be the emerging market offering the most investment opportunities this year.

The survey's findings were based on research conducted by KPMG in Russia between December 2008 and February 2009, and canvassed the views of 42 private equity houses based in Western Europe and the USA for its international sample, in addition to 30 Russia-based private equity houses.

Of those questioned for the KPMG survey, 73% believed that energy, mining and utilities sectors will provide the most attractive returns in the near future, with 71% of international respondents thinking the same of the consumer sector.

Approximately three quarters of all respondents believed that low valuations and distressed situations will be the most significant drivers of merger and acquisition (M&A) activity in the short term.

Those polled by KPMG also suggested that lower valuations mean that many companies will only dispose of assets in the short term if they are forced to do so out of economic necessity, with 70% of the Russian sample considering that oligarch-funded private equity houses may, over the year, opt to exit investments to provide liquidity for the owners' core businesses.

Macroeconomic volatility was cited as the main obstacle to private equity investment by 89% of the international sample of KPMG's respondents, and 77% of the international sample felt that knowledge of the Russian market is the most critical factor for successful M&A transactions in Russia, a view supported by the vast majority of Russian respondents.

Thomas Dix, KPMG's Head of Transaction Services in Russia and the CIS, confirmed this, observing: "One of the specific challenges of doing business in Russia is the requirement for local knowledge and connections. International houses will, in my view, struggle without a strong local presence."

He went on to add: "Due to the lower growth prospects of the Russian economy, the value creation capabilities that international [private equity] houses can bring are increasingly important. Therefore, I expect to see more international players cooperating with Russian houses in the future."

The PricewaterhouseCoopers (PwC) EM20 Index for 2009 has Chile, Malaysia, Bulgaria and China in its top four slots. PwC thinks that that the BRIC countries (Brazil, Russia, India and China) continue to offer interesting opportunities for investment. 'For manufacturing companies seeking to invest in emerging markets,' says PwC, 'low production costs are, of course, essential but other facts then come into play, including a country’s risk premium, its distance from key export markets and the local taxes. Amongst the Asian countries in the PwC EM20 Index, India tops the Manufacturing Index, followed by Vietnam, Thailand, Malaysia and China.'

PwC Malaysia Managing Director Chin Kwai Fatt said: “It is encouraging that Malaysia ranks in the top 20 for not just one, but both the manufacturing and services indices. This is a good reflection of the workforce capability, cost effectiveness and infrastructure, which we possess. With Thailand and Vietnam also placed in the rankings, the collective strength of our region will steer more foreign investment our way. However, our challenge will be to navigate through potential political and economic changes to ensure continued success.”

Ian Coleman, UK head of emerging markets, PricewaterhouseCoopers LLP, commented: “The main reason why China trails countries such as India and Vietnam is that the EM20 risk-reward index is a ratio measure which does not take into account the absolute size of a country’s market. If a company was looking to develop a very large-scale manufacturing facility, the labour capacity and physical infrastructure required would arguably rule out some of the countries at the top of the Manufacturing Index and would increase China’s relative attractiveness.”

Hedge Funds In Emerging Markets

Over 1,000 hedge funds now focus on investing in Asia. This total represents over 15% of the total number of funds in the global industry and exceeds the 12% focusing on Europe. However, Asia-focused funds are characteristically smaller, accounting for 4.9% of total industry assets versus the 9% found in European-focused funds.

China is home to the third largest number of hedge fund firms globally. While over 85% of firms are located in the US and the UK, nearly 3% of firms are headquartered in China. Also reflecting an increasing trend of operating funds in local markets, while 48% of all funds investing in Asia are still located in the US and UK, in 2009 20% of funds investing in Asia were located in China, up from 17% one year previously.

“Hedge funds investing in Asia began the current period of consolidation earlier than the overall industry, but also now appear to be stabilizing earlier,” said Kenneth Heinz, President of Hedge Fund Research. Adding: “Global investors are likely to have strong interest in allocating to Asia-focused hedge funds in 2009, as they look to access Asia’s superior secular growth dynamics, supported by the relative stability of the region’s banking sector and global currency reserves.”

The sustained interest of hedge funds in emerging markets is echoed across the financial landscape, with many bank and other institutions behaving as if emerging markets will form a long-term part of their investment horizons. But nowhere is it more marked than in the GCC, and particularly in Dubai.

Nonetheless, emerging markets (EM) hedge funds experienced a net withdrawal of USD1.5bn in the second quarter of 2010, according to figures released on August 19 by Hedge Fund Research (HFR).

This represents the second consecutive quarter, and the seventh quarter in the last eight, in which EM hedge funds have experienced a net capital withdrawal. Combining Q2 outflows with performance-based losses, total capital invested in EM hedge funds declined by USD3.2bn, to end the quarter at just under USD95 bn.

HFR said that EM outflows reflect a significant decoupling from the overall hedge fund industry, which experienced a net capital inflow of USD9.6bn for Q2 2010, and a first half capital inflow of USD23bn. Combined with redemptions in excess of USD550m in the first quarter of 2010, investors have withdrawn over USD2bn from EM hedge funds in 1H10.

EM outflows were region-specific during the period; investors allocated new capital to hedge funds focusing on Latin America and the Middle East, while redemptions were concentrated in Russia and Emerging Asia. By investment strategy, EM funds in Equity Hedge experienced USD1.8bn in redemptions, which was only partially offset by inflows of USD320m to Macro EM funds.

The performance of commodity-focused hedge funds has also been adversely impacted by recent commodity market volatility, with the HFRX Commodity Index down 5.6% year to date through July. As both importers and exporters of individual commodities, most EM economies maintain characteristic sensitivities to commodity price movements which can be detrimental, beneficial or variable, depending on the specific economy and price movement. Despite broad divergences across different commodity markets, hedge funds focused on metals, agricultural and energy commodities have all experienced negative performance in the year to date, 2010, HFR noted.

“Changes in global growth expectations, prospective currency volatility and commodity-specific market influences have resulted in a near term decrease in investor risk tolerance for Emerging Market hedge fund exposure,” said Kenneth J. Heinz, President of Hedge Fund Research, Inc. “While many of these risks have persisted into 3Q10, many powerful trends in EM equities, sovereign credits and commodities have also reversed; hedge fund investors considering the tactical, cyclical and overall positive performance dynamics of EM hedge funds will look to access these trends in coming quarters.”

Real Estate In Emerging Markets

Property markets in South America, Asia and Eastern Europe are outperforming those in the UK and the Eurozone, says the Royal Institute of Chartered Surveyors (RICS) Global Property Survey for for the second quarter of 2010.

The RICS survey indicates that occupier demand is rising in the majority of countries across the globe with the notable exception of the UK and Eurozone countries where tough fiscal measures appear to be having a more pronounced impact on the appetite of businesses to take up new space.

Significantly, the report notes, France is bucking the negative Eurozone trend with more material signs of an upturn in sentiment towards real estate reflecting, in part, the relatively resilient performance from the domestic economy. Significantly, surveyors in the US reported a rise in tenant demand across all three sectors for the first time in three years, the survey shows.

Brazil is leading the way with the net balance of surveyors reporting a rise in occupier demand moving from 70% to 85% with markets in Peru and China also performing well. By way of contrast, demand in the UK turned negative for the first time in a year with the net balance falling from a positive 14% to a negative 4% while the net balances in Spain, Germany and Greece are all in negative territory.

Transactions fell in the UK for the first time in a year with the net balance of surveyors reporting a fall in activity sliding from a positive 24% to a negative 5%. More surveyors again reported a drop (than a rise) in activity in the United Arab Emirates and Greece.

Indicators in China still remain strong despite measures introduced by the Chinese government to address the property boom, the survey reveals. Indicators for occupier demand, rental expectations and the number of investment bidders per property all remain firmly in positive territory.

Elsewhere in Asia, RICS says that the latest numbers from India suggest a strong showing from real estate in the second quarter despite the increase in interest rates.

Looking forward into the third quarter of 2010, sentiment towards capital values is particularly strong in France, Peru and Brazil while surveyors are most optimistic on rental increases in Brazil, Hong Kong and Peru.

Other key points highlighted by the survey include:

• New development starts are rising in Brazil, Peru and Argentina
• Surveyors report first declines in Japanese yields since 2007 on uptick in investment demand
• Investment bidders per property rose at a faster pace in the US
• Capital values are still declining in Ireland, Spain and Greece
• Occupier enquiries are strong in Brazil and Republic of Ireland UAE indicators are less negative than in Q1
• Rents are now increasing in the Ukraine

"The real estate world continues to be split broadly speaking between the emerging and developed economies," observes Simon Rubinsohn, RICS chief economist. "Strong growth in many of the former, including the likes of Brazil, Hong Kong and India, is continuing to boost demand for new space from occupiers as well as encouraging investment activity."

"Meanwhile in many of the latter, fiscal retrenchment allied to bank deleveraging continues to place significant obstacles in the way of a meaningful recovery in the commercial property market," Rubinsohn adds.

Emerging In The City

For many investors, it is the performance of emerging markets' stock exchanges which matters most, and they had smiles on their faces in September, 2009, when emerging markets stocks hit highs for the year. MSCI's emerging market index was at its highest level since September 9, 2008, a few days before Lehman's implosion. The emerging markets sector is up 85% since last March.

"As we are moving into the fourth quarter, markets and investors are looking to position themselves for the rest of this year and the beginning of next year," said Zsolt Papp, chief economist for emerging Europe at KBC. There is a bit more optimism toward the global outlook, the IMF has upgraded its 2010 growth forecast. Data for 2009 is not going to affect markets any more."

While indices may be high, the picture is not so bright when it comes to M&A. The first half of 2009 saw a dramatic slowdown in the number of cross-border deals involving emerging market companies buying assets in the developed economies.

The extent to which the emerging economies have broken clear of recession much quicker than their developed economy counterparts has been highlighted by research into the latest cross-border deal activity.

According to KPMG’s latest Emerging Markets International Acquisition Tracker (EMIAT), trade buyers in the emerging economies are already back on the cross-border acquisition trail yet the number of deals instigated by buyers in the developed economies is still in decline. The number of Emerging-to-Developed (E2D) deals registered in the second half of 2009 stood at 102, representing a strong bounce back from the 78 recorded in the first half of 2009. By contrast, the number of Developed-to-Emerging (D2E) deals fell to 216; making it four consecutive six month periods during which that figure has fallen.

Commenting on the findings, Ian Gomes, Chairman of KPMG’s High Growth Markets practice for KPMG in the UK, said: “Much has been said recently about the way in which the competitive threat posed by the emerging and high growth economies has been accelerated as a result of the credit crisis and ensuing recession. These figures bear that out. The emerging economies – and the trade buyers within – have emerged quicker and more strongly from the problems which continue to haunt Western economies. The EMIAT shows that the emerging economies were affected by falling deal numbers for just a year. The developed economies have had two years of decline – and we’re not even sure if we’re at the bottom yet.”

"While their decline continues, there are signs everywhere of how E2D activity could be about to really accelerate. Chinese companies are showing greater interest in overseas acquisitions, prospecting for deals and conducting plenty of feasibility studies. Activity out of the Middle East is increasing and this will only accelerate once the local Sovereign Wealth Funds (SWFs) make their move, inspiring others to follow. Amidst it all, the Indian buyers sit relatively quietly at home, waiting for bank lending to begin again as their preference has always been to work with debt rather than equity. If and when that happens, and the acquisitive Indian corporate base rumbles back into life, the gap between E2D and D2E deal values could narrow extremely rapidly.”

Of course it's not just in emerging market stock markets themselves that local companies choose to list. There have always been plenty of Global Depositary Receipts and American Depositary Receipts for companies with illiquid domestic markets, and large Russian, Chinese or Latin American companies frequently list directly on major stock exchanges, offering an alternative play for emerging markets investors.

According to offshore law firm, Walkers, offshore listings on the London Stock Exchange's Alternative Investment Market (AIM), an international market for smaller growing companies, were on the rise in 2008.

Walkers reported that it was seeing more interest from companies in India, China, and other emerging markets who want to gain the benefits of offshore listings by accessing the exchange through Jersey and the British Virgin Islands.

“AIM offers a tremendous amount of liquidity to smaller companies, as well as access to institutional investors who often turn into mentors and partners,” observed Hiren Patel, a partner in Walkers’ Jersey office who did the first offshore AIM listing for a Chinese company in 2004.

“It’s a win-win situation since AIM has lower listing fees compared to other exchanges and investors often see significant return on their investments in emerging markets which AIM can access. There are clear tax advantages, on top of the benefits of AIM listing, if the listing is done through an offshore jurisdiction such as Jersey or the BVI," Patel added.

The firm's optimism seemed to have been borne out when the London Stock Exchange announced in June, 2008, that KSK Emerging India Energy Fund Limited had become the fourth Indian firm to float on AIM in the last four weeks. Between them the four new Indian firms had raised an estimated USD387mn.

KEF is a closed ended investment company established to make investments in companies engaged in the Indian power and energy sector.

On admission to AIM, KEF raised USD200mn, the largest AIM float to date in 2008. The other three Indian firms to have joined AIM over the past month are Indus Gas, OPG Power Ventures and Mortice Ltd.

Tracey Pierce, Head of Equity Primary Markets, London Stock Exchange Group, commented:

“With London now firmly established as the number one market for international companies it makes sound sense for Indian companies with global aspirations to look to join the London Stock Exchange."

"The four Indian firms that have chosen to go global through AIM over the last four weeks are now benefiting from access to the world’s deepest pool of international capital and a knowledgeable, outward looking, professional investor base, committed to serving emerging markets. The pipeline of growing, innovative Indian companies looking to admit to AIM remains strong.”

KEF’s arrival takes the total number of companies from India on the London Stock Exchange’s markets to 52, with a combined market cap of USD16.8bn. In total Indian firms have raised USD5.3bn through flotations on the London Stock Exchange. Trading in the secondary market also remains strong, with over USD5bn worth of trading in Indian securities on the International Order Book so far this year.

Stock Markets In Emerging Economies

There are more than 30 stockmarkets in countries which could broadly be considered as 'emerging', and it's not possible to cover them all here (but see the Lowtax Network Intelligence Report On Offshore Stock Exchanges on sale from www.lowtaxlibrary.com).

Dubai is prominent among emerging financial hubs. The first Middle East International Banking, Financial Technology and Services Exhibition and Conference (MEFX) took place in June, 2008. Presented by the Dubai International Financial Centre (DIFC) and organised by the Dubai World Trade Centre (DWTC), MEFX was held from 1st - 3rd June, 2008 at the Dubai International Convention and Exhibition Centre.

Over 70 participating companies from 20 countries showcased advancements in products, technologies and services in the financial industry.

The UAE banking sector is the largest in the GCC, and its annual growth rate of 35% exceeds the country's GDP growth rate.

Helal Saeed Al Marri, Director General of the DWTC, commented that:

"As the regional financial industry continues its unprecedented growth, we are delighted to create an annual fixture in the event calendar to facilitate the networking of the region's market leaders and emerging players with global suppliers in financial technologies and services."

"MEFX will evolve to be a most productive platform to accelerate the product and knowledge exchange within the regional financial community to ensure it keeps abreast of the dynamic momentum of development."

Abdulla Al Awar, Managing Director of DIFC Authority added that:

"The launch of MEFX comes at a time when the regional financial market is entering a new phase of development. Overall economic growth has enhanced the financial industry and markets within the region have become vital for global financial institutions seeking to grow."

"MEFX provides a great opportunity for industry professionals to share ideas and best practices that will foster further growth in the industry. DIFC is supporting MEFX as part of its objective of promoting financial business events that showcase new products, technologies and initiatives that can drive industry development."

Amongst the other issues addressed at the event, a specialised session focused on the Islamic Finance market, which is growing at a phenomenal rate of 20% annually.

Hot on the heels of Dubai as financing hubs for the Asia/Pacific region are are Qatar, Brunei and Labuan. Releasing its 2007 Annual Report in May, the Labuan Offshore Financial Services Authority (LOFSA) revealed that the Labuan IBFC continued to record double-digit growth in the number of new offshore companies, which totalled 6,297 in 2007.

The availability of expertise and quality service providers and the wide spectrum of products and services has made the Labuan IBFC an increasing attractive domicile for investors, LOFSA suggested.

The offshore banking industry reported an expansion in the loan assets, complemented by an improvement in the asset quality.

The total assets of offshore banks increased by 27.8% from USD21.1bn in 2006, to USD 27bn in 2007. The gross non-performing loans indicator also improved further, from 2.8% in 2006 to 2.0% in 2007.

The offshore leasing business continued as one of the main offshore financial activities, to become one of the highest growing financial industry in Labuan IBFC in 2007.

Total new lease financing increased by 18.7%, resulting in a cumulative financing of USD14.1bn. This has been boosted by strong activities in the oil and gas sectors, as well as increased shipping activities in the region.

The report went on to reveal that the offshore insurance industry continued to expand, particularly in the reinsurance business sector, which grew by 40.3% to USD919.2mn in 2007, of which 62.0% were non- Malaysian premiums, signalling its growing role as a reinsurance centre.

This is also reflected by the increasing amount of re-takaful contributions, amounting to USD108.4mn, an increase of 42.8% from 2006.

For the year 2007, Islamic-based assets in the Labuan IBFC continued to grow, to USD1.2bn, representing an increase of 36.9% as compared to 2006. There was strong interest from investors from the Middle-East seeking to invest in the Asian region.

The position of Malaysia as an International Islamic Financial Centre (MIFC) has further enhanced Labuan’s effort to promote Shariah compliant trusts and foundations, as these products complement the Islamic financial products and services that are already available onshore.

The Labuan International Financial Exchange (LFX) also recorded four new listings, bringing the total number to 31, with total market capitalisation of USD15.1bn.

One of the major listings was the Sukuk issuance of USD1bn by Saudi Arabia based Dar Al-Arkan International Sukuk Company.

Going forward, LOFSA has identified several key strategic programmes to advance Labuan as an International Business and Financial Centre.

One such initiatives is to elevate Labuan IBFC‘s status to being the “gold standard for holding company jurisdiction”.

Malaysia’s extensive tax treaty network with more than 60 countries and the introduction of a more flexible tax framework supports this initiative.