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by Carla Johnson, October 2011, 21 October, 2011
Come rain or shine, as regards the global economy, the emerging markets, or developing nations (there is no consensus on what word to use) have consistently outperformed developed nations for a number of decades. Even in the depths of the financial crisis, the emerging economies posted overall GDP growth of 2.5% whereas the world economy as a whole shrank by 0.5%.
The contrast between developed and developing economies continued into 2010, with a consensus forecast for developing country growth of 6.1% outshining developed country growth of just 2.3%. This trend is set to continue in 2011, albeit at a slower pace, with the IMF predicting emerging economy growth of 6.4% versus developed world growth of 1.6%
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 showing more or less the same amount of shrinkage as in developed countries. 2011 projections by the Institute of International Finance show that emerging market FDI flows appear to be stabilizing around the USD1 trillion mark, and they are expected to recover to USD1.053 trillion in 2011, slightly higher than in 2010.
However, while emerging economies are generally expected to continue to outperform the developed world for many years to come, unfavourable economic developments in the 'first world' are giving emerging market investors pause for thought.
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:
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
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 fuelled 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 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 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.”
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 Khodorkovsky 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.
Approaching the end of 2011, the future is, to say the least, uncertain, with the Eurozone crisis having reached critical, equity markets in a tailspin and many economies heading for a ‘double dip’ recession.
The fact that these economic concerns are largely concentrated in the developed economies may stand emerging markets in good stead, however, as noted by the Institute of International Finance (IIF) in its September 2011 report on capital flows to emerging market economies.
“Private capital flows to emerging economies have been subject to conflicting forces in recent months,” the IIF said. “On the one hand, rising fragilities and uncertainties surrounding the global economic outlook have dampened overall flows, as is typical in such adverse periods. On the other hand, however, the fact that global economic worries are concentrated in mature economies, and that interest rates and bond yields in those economies have been cut to the bone means that the relative attractiveness of emerging markets generally continues to improve. This should promote net flows to emerging economies. In our projections, these two developments broadly offset each other.”
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. However, the index showed that emerging market growth slowed to its weakest level in two years in the second quarter of 2011, reflecting global economic fragility, the exceptional consequences of the Japanese tsunami and the lingering impact of recent inflation. As a consequence, The HSBC EMI dipped to 54.2, down from 55.0 in the first quarter of 2011 and edging below the long-run series average of 54.8.
“HSBC’s latest EMI confirms that, after a strong rebound in the immediate aftermath of the global financial crisis, the pace of activity in the emerging markets has faded. In many parts of the emerging world, there has been a noticeable reduction in the growth of export orders, consistent with the recent experience of countries in the developed world, suggesting world trade growth peaked in the first quarter of the year,” explained Stephen King, HSBC’s Chief Economist.
He continued: “More encouragingly, the cornucopia of ‘quantitative tightening’ measures HSBC identified at the last EMI seem to have tamed the significant risk presented to longer-term economic growth by inflation. This seems particularly true of China, where both output growth and inflation fell markedly during the first half of 2011."
“Emerging nations remain magnets for global capital and are increasingly investing in each other with the prospect of more and more Asian-funded infrastructure projects in Latin America and parts of Africa. As this new infrastructure comes on stream, so a new network of economic connections across the emerging world will be established, along what HSBC has termed ‘The Southern Silk Road’.
“If a soft landing can be achieved, the stage is set for a sustained period of growth across the emerging world driven by new ‘South-South’ connections. The result of all these changes could easily be a tenfold increase in intra-emerging market trade in the first half of the 21st Century.”
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.
The Asian hedge fund industry continued to attract new investor capital in the 2nd quarter of 2011, despite increasing inflationary pressures, volatile commodity and global equity markets, and uncertainty regarding both US and European sovereign debt according to data released in August by HFR (Hedge Fund Research, Inc.). Investors allocated USD2.6bn of new capital to Asia-focused hedge funds in Q2, offsetting a performance-based decline and increasing the total capital invested in Asia-focused funds to nearly USD90bn.
Asia-focused hedge funds generally posted modest declines for the quarter, with the HFRX China Index and the HFRX Japan Index declining by -1.95 percent and -0.42 percent, respectively, for the quarter. Year to date, the HFRX Japan Index has gained 0.08 percent while the HFRX Asia with Japan Index was essentially flat, posting a narrow decline of -0.01 percent.
While many Asian-focused funds invest broadly across the region, the number of funds investing primarily in China (32.9 percent), India (16.8 percent) and South Korea (4.2 percent) all experienced increases. Geographically by firm location, the number of Asian hedge funds located in China and Singapore increased in Q2, while the number located in Japan and Australia declined for the quarter. The asset concentration in Asia-focused hedge funds also increased in Q2, with nearly 62 percent of the capital invested in funds with greater than USD500 million, approaching the concentration level of the broader hedge fund industry.
“Powerful and pervasive trends dominated both the Asian hedge fund industry and global financial markets in the second quarter, but the impact of these trends was felt in different ways across geographic regions, particularly in Asia,” said Kenneth J. Heinz, President of HFR. “Large disparities between developed and emerging markets, including inflationary pressures, commodity demand dynamics, and currency risk, impacted investors during the quarter. Global investors are allocating to the Asian hedge fund industry not only as a means to insulate themselves from the volatility of these trends but also to position their portfolios to benefit from for uncorrelated opportunities in coming quarters.”
“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 Heinz, 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 represented the second consecutive quarter, and the seventh quarter in the previous eight, in which EM hedge funds had 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 USD95bn.
However, total capital invested in Emerging Market-focused hedge funds increased by USD1.4bn during the second quarter of 2011, including new capital inflows of over USD300m and performance-based returns of USD1.1bn. This was the fourth consecutive positive quarterly inflow as well as the fourth consecutive quarterly increase in overall Emerging Markets hedge fund assets, and brings total assets invested in EM hedge funds to USD123bn, a new record.
“Through mid-year 2011, the decoupling and divergence of Emerging Markets from their developed market counterparts has become increasingly evident and significant, and can be seen across currencies, sovereign debt, and different types of hedge fund exposure,” said Heinz.
“As risk aversion has increased through mid-2011, investors are increasingly looking to Emerging Market hedge funds not only for continued secular economic growth, but also for tactical exposure to macroeconomic trends, currency stability, and hedged, uncorrelated exposure to developed market equities. A likely continuation of these trends will drive capital growth in EM hedge funds in the second half of 2011,” he added.
Overall Emerging Market hedge fund performance was muted through the first two quarters of the year, with the HFRI Emerging Markets (Total) Index essentially flat (0.0%) while the HFRX Total Emerging Markets Index gained 0.67%, both through July.
Positive contributions from EM exposure in funds investing in Russia and Latin America was offset by Emerging Asia and Latin America, the HFRI EM: Russia Index gained 3.6% through July, while the HFRI: EM Asia (ex-Japan) Index posted a decline of -1.9%.
While the number of EM hedge funds globally remained relatively constant at just over 1,000 as of the end of Q2, EM hedge funds represented over 10% of global hedge fund launches and over 16% of liquidations in the most recent quarter.
Real Estate In Emerging Markets
Real estate markets in non-Japan Asia and parts of central and eastern Europe are outperforming traditional markets, says the Royal Institute of Chartered Surveyors (RICS) Global Property Survey for the second quarter of 2011.
The RICS survey indicates that expectations for both rents and capital values are generally strongly positive, although in some cases a little less so than previously. Divergently, the mood in much of peripheral Europe, Japan and the UAE remains fairly gloomy.
China and Hong Kong continue to be the star performers in both occupier and investment markets despite the various measures taken by the respective authorities to cool demand. The results in Singapore also show a strong measure of resilience on the part of the real estate sector. However, it is significant that they have been joined near the top of the global rankings by the likes of Russia, Poland and the Czech Republic.
The particularly positive outlook for rental expectations in Russia is being underpinned by strong occupier demand and a lack of good quality space. In Poland and the Czech Republic, expectations for capital values are picking up smartly in response to an upswing in investor demand.
Respondents to the survey from Brazil suggest that the real estate market in the country remains firm and that this is encouraging a strong response in terms of the development pipeline. Meanwhile, in India most of the indicators are showing signs of losing momentum although the expectation is still for rents and capital values to continue rising.
Predictably, the results show the mood in the countries on the outer fringes of the euro area to have deteriorated further in Q2, as concerns over a Greek default intensify. Indeed Greece, the Republic of Ireland and Portugal (as well as Spain) sit at, or just above, the bottom of the rankings for most of the key indicators.
Sentiment in Japan and the UAE also remains negative; the former is seemingly still to recover from the fallout of the March earthquake and consequently the outlook for Q3 is weak.
The 2011 edition of The Wealth Report, produced by Citi Private Bank and Knight Frank also shows that while demand from wealthy investors for luxury property in key locations such as New York and London remains high, cities in emerging economies are coming up fast on the rails.
New York and London remain at the head of The Wealth Report's Global Cities Index, but respondents to the Attitudes Survey predict that Asian cities such as Shanghai and Mumbai will soon start to close the gap substantially; Mumbai has increased in importance by 118%, Shanghai by 91%, and Sao Paolo by 66%. However, New York and London are expected to enjoy their pre-eminence for a few years yet.
"The most reassuring element to note for New Yorkers and Londoners is that the two top spots don’t look set to change over the next 10 years, although the current chasm between these two cities and the rest is set to close rapidly," writes Liam Bailey of Knight Frank.
With the exception of New York and London though, the remainder of the index looks set for a "total makeover" in the coming years, says Bailey.
"Some of the established Asian centres, such as Singapore, Hong Kong and Tokyo, appear at risk of relative weakening compared to China’s rising stars of Beijing and especially Shanghai," he notes. "The biggest fallers seem set to be Geneva, Zurich, Washington and San Francisco, while Vancouver falls out of our future top 20 entirely."
"The three biggest winners point to a rebalancing within the Brazil, Russia, India and China (Bric) grouping, with the main cities to watch being Mumbai, Moscow and Sao Paulo," Bailey continues. "They look set for a dramatic upswing in their status, with each expected to climb by between six and eight places over the next decade."
According to the report, luxury property price growth was highest in Shanghai with a 21% rise. London and New York saw increases of 10% and 13% respectively.
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.
After 20% growth in the year to October 2010, many analysts were confidently predicting that emerging market shares would rise by as much as 30% in 2011. But then came the debt crises in the eurozone and the United States, coupled with a growing feeling that the developed world was on the brink of a double dip recession, and instead the MSCI EM Index was down by almost 30% year-to-date as of October 5.
Some analysts and traders consider this the ideal time to pick up emerging stocks at a deep discount. But the rapid post-Lehman descent, followed by the equally rapid rebound, demonstrates that emerging market stocks are not for the faint-hearted. At the time of writing, nobody is entirely sure what lies in store for the eurozone, and the continuing flight to safety as investors eschew perceived risky investments in favour of the US dollar and gold shows that emerging markets are not yet completely 'decoupled' from the travails of the developed economies as some economists had been observing.
Indeed, many of the emerging markets have their own problems to contend with, brought on by such factors as unpredictable 'hot money' foreign investment inflows, which have driven asset bubbles in certain countries, and commodity boom-driven inflation.
As David Hauner, Head of EEMEA Economics and Fixed Income Strategy at BofA Merrill Lynch Global Research, put it: “With a prolonged period of dollar appreciation, the question is not where you can make money in emerging markets, but where you will lose the least money."
Despite the uncertainty plaguing emerging economy stock markets, there remains plenty of interest in tracking EM stocks among investors. For example, as recently as October 2011, MSCI unveiled a new tradable index, the MSCI EM 50 Index. The index is highly correlated to the flagship MSCI Emerging Markets Index, but is composed of just 50 of its largest constituents.
“We have seen significant demand from clients around the world for a tradable version of our market-leading MSCI Emerging Markets Index — especially from those who face various obstacles in replicating broader emerging markets indices,” said Theodore Niggli, MSCI Managing Director. “We expect the MSCI EM 50 Index will serve as the basis for numerous index-linked investment vehicles, ultimately providing investors with new ways to gain exposure to Emerging Markets, which have been a critical driver of the global economy over the past decade.”
Based on the broad MSCI Emerging Markets Index, the MSCI EM 50 Index is a representative and easily replicable alternative. The new index applies eligibility screens to exclude some of the smallest Emerging Markets countries and uses depositary receipts for certain markets that are less accessible to foreign investors.
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.
This followed the launch in August 2011 of MSCI's Overseas China Indices, which covers over 60 Chinese securities listed in the US and Singapore with a market capitalization of USD68bn, none of which were included in the existing MSCI China Indices.
“The launch of the MSCI Overseas China Indices provides investors with a more complete view of the China equity market by capturing Chinese securities listed outside Greater China,” said Deborah Yang, Managing Director and Head of Asia Pacific ex Japan for MSCI. “The creation of the MSCI Overseas China Indices has been driven by strong interest from institutional investors, particularly QDII managers in China, as they search for the most appropriate index for benchmarking or for the creation of index linked investment products.”
The MSCI Overseas China Indices are designed to capture the investable universe of Chinese securities outside Greater China, covering Chinese securities listed on the NYSE Euronext - New York, NASDAQ, New York AMEX and the Singapore Exchange. “We believe that the MSCI Overseas China Indices are the most comprehensive and rigorously constructed indices covering this important investment opportunity set,” added Chin-Ping Chia, Head of MSCI Index and Applied Research for Asia Pacific. “For example, they exclude companies formed through reverse merger or currently on the SGX Watch List. In addition, the indices employ similar size and liquidity screens to those currently applied to the MSCI China Indices to ensure consistency and investability.”
The MSCI Overseas China Indices have also been combined with the existing MSCI China Indices, creating 60 new indices in total – all of which are available direct from MSCI starting today. For example, the combination of the MSCI Overseas China Index with the existing MSCI China Index and the MSCI China A Index, forms the new MSCI All China Index. Large, mid and small cap versions of the MSCI All China Index are also available, covering over 2,100 constituents and providing a comprehensive global representation of the China investment opportunity set.
Stock Markets In Emerging Economies
There are more than 30 stock markets 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).
The emerging markets look set to dominate the exchanges sector, driving transformational change, deal making and merger and acquisitions activity, according to a new report by PwC.
The report, "Trading blocs – what next for the stock exchanges?" shows that the top emerging market exchanges to watch are those in Brazil, Hong Kong, Singapore, Shanghai and the merged Russian exchange. As a result, it is suggested that Western exchanges focus on developing post-trade clearing and settlement capabilities or fostering ties with emerging market players, with such tactics seen as the most viable growth options.
In addition, the report stresses that high operating leverage and heightened competition have suppressed margins across the sector and will continue to provide a compelling economic rationale for consolidation. Regulatory changes are seen to have enabled much of the new competition in Europe, with Europe’s Market in Financial Instruments Directive cited in particular, for it allows new entrants with low-cost business models to seize market share.
Consolidation trends are likely to be seen in Asia and Latin America, according to Shamshad Ali, partner at PwC. Ali said: “Talk of an end to consolidation in the stock exchange sector may be largely true for the more mature Western European markets, but Asia and Latin America are likely to see significant M&A in the future - if regulatory hurdles can be overcome. Over the next five years, significant M&A activity will be driven from the emerging markets as local exchanges seek growth opportunities outside their home markets. As economic growth in the emerging markets continues to outstrip the traditional markets, exchanges in Asia and Latin America have the obvious benefit of being positioned within the heart of this growth surge.”
Furthermore, PwC states that, in addition to serving local companies, Hong Kong and other leading Asian exchanges have already seen an increasing number of dual-listings from Western corporations keen to access the region’s growing capital bases. The Asia Pacific region has seen significant growth in the value of share trading over the last decade, reporting a 20% rise in values between 2000 and 2010. In comparison, the Americas and EMEA region both saw a decline in values by 14% and 6%, respectively.
Ali added, “The difficulties encountered by bidders in several recent aborted mergers among Western exchanges have led to a number of businesses questioning their next move. Given the shift in global growth and associated capital flows, traditional exchanges cannot afford to ignore the dominant role the emerging markets are likely to play in the future exchanges landscape. They will need to look closely at different models to compete against, or collaborate with, their emerging market counterparts.”
Nonetheless, PwC is clear that, despite strong growth predictions in the Asian region, a number of hurdles to M&A remain. As Asia is not a single market, is does not possess a single regional regulator. This means that it has not developed the cross-border market liberalisation measures that would pave the way for more straightforward cross-border mergers. Local considerations, such as constraints on foreign investment, are also a crucial barrier to further intra-regional consolidation.
Ali concluded, “The big unanswered questions are how many major exchange groups can the markets support and how will regulators respond to increasing concentration in markets, some of which are fundamental to the economic success of the economy.”