Why stick to just UK-listed shares, when this exciting world awaits you?
The world's first stock markets started appearing in Europe in the 15th and 16th centuries.
As more and more limited-liability companies were created, their thirst for capital for investment and expansion led to multiple booms and busts. What's more, thanks to massive growth in global trade, listed companies began growing exponentially, as did national stock exchanges.
A whole world of markets
Of course, during the boom years of the Noughties, global stock values soared.
Indeed, by 2007, the total value of companies listed on global stock exchanges neared $64 trillion, according to data compiled by the World Bank. In comparison, world gross domestic product (total global output) reached $65 trillion in 2007.
However, the arrival of a global credit crunch in the summer of 2007 put a stop to the market leaps of 2003 to 2007. What's more, as developed-world economies went into recession, global stock prices plunged. Thus, in 2008, more than $29 trillion was wiped from the market value of global equities, the World Bank's figures show.
In 2010, the World Bank's survey listed 109 nations with one or more stock exchanges. These ranged in size from the mighty US exchanges (total market value: $17.1 trillion) to the tiny Armenian stock exchange (market cap: under $28 million).
A dozen enormous exchanges
Here are the world's 12 largest stock exchanges, ranked by market capitalisation in 2010:
| Country | Market value
($ trillion) |
|---|
| United States | 17.1 |
| China | 4.8 |
| Japan | 4.1 |
| United Kingdom | 3.1 |
| Hong Kong | 2.7 |
| Canada | 2.2 |
| France | 1.9 |
| India | 1.6 |
| Brazil | 1.5 |
| Australia | 1.5 |
| Germany | 1.4 |
| Switzerland | 1.2 |
| Total | 43.1 |
Source: World Bank
As the birthplace of modern consumer capitalism, the US dominates this list. The market value of shares listed in the US exceeds $17 trillion, or almost a third (31%) of the global total of $55.3 trillion. In fact, the American stock exchanges are so large that they exceed the combined value of the next five biggest markets ($16.9 trillion).
In second place is fast-growing China, whose listed companies have a combined market value approaching $5 trillion. Japan takes third place, with a market value of just over $4 trillion.
Despite accounting for less than 1% of the world's population, the UK is a bastion of corporate enterprise. Hence, London-listed companies have a total market value above $3 trillion. Just behind the UK is the bustling, bubbly Hong Kong Stock Exchange, at $2.7 trillion.
Once outside of the top five, the market value of listed companies drops off dramatically. Canada is in sixth place ($2.2 trillion), France is seventh ($1.9 trillion) India is eighth ($1.6 trillion), Brazil is ninth ($1.5 trillion) and Australia is in tenth place ($1.5 trillion).
Bringing up the rear of our top 12 are Germany ($1.4 trillion) and Switzerland ($1.2 trillion). In total, the collective value of companies listed in these 12 countries is more than $43 trillion. In other words, these dynamic dozen account for almost four-fifths (78%) of the global total of $55.3 trillion.
Sharing the wealth
While most of these stock markets are roughly where I expected them to be, I did learn one or two things when crunching these numbers. The top five are pretty much as I'd expected, so the surprises came from the lower rankings.
For example, I had no idea that Canada's stock market was over 50% larger than Germany's ($2.2 trillion versus $1.4 trillion). Also, India and Brazil have been storming up this league table, partly thanks to rapid growth and the mounting middle classes in these emerging economies.
Another shock was the weakness of Continental capitalism, with Spain relegated to 13th place and Italy a long way off the pace in 25th place.
Once again, this survey demonstrates the virtue of investing globally, rather than regionally. Why invest solely in UK-listed stocks, when a whole world of listed companies awaits you outside of these borders?
In short, while there are extra risks involved in investing in foreign equities, the potential rewards could be well worth the effort for bargain-hunters!
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