According to recent estimates, equity accounts for nearly
half of the growth in global financial assets as more institutional
and individual investors tend to allocate a greater share of their assets to equities. Since 1980, global equity market
capitalization has grown at an annual rate of around 12%.
With regards to global GDP, the capitalization of world stock
markets increased from 23% of GDP in 1980 to almost
110% of GDP at the end of 2007 (see above graph). The rising
share of equity in global financial assets reflects the transfer
of ownership of productive assets from government and
private owners to public markets and the increasing reliance
of corporations on public equity financing to fund their operation.
UBS believes that the underlying trend towards an
increasing role for equity financing and equity investments
remains intact, even though the private equity industry is
also growing fast. In Western Europe, UBS sees significant
growth potential because of continued financial market integration.
Growth potential is even higher in the emerging
markets in view of the relatively low levels of stock market
capitalization compared with GDP. Equitization is expected
to provide growth opportunities not only to investment
banking and securities businesses, but also to wealth and asset
managers, as assets are increasingly shifted into higher
margin classes. In addition, with the continued commoditization
of trading services, UBS believes that smaller providers
will start outsourcing these services to larger competitors.
