Finance Centers =====

By pjain      Published Aug. 12, 2019, 11:31 p.m. in blog Invest   

Finance Centers Key Factors and Trends

What?

A financial center as a “city in which a large amount of a country’s financial transactions take place, and where the main exchanges are located.” - FT.com

Law and Order between Corporations

English Common Law was the first globally to attempt to enforce regulations on the dangerous practice of fractional reserve banking.

Where the Money Is Available!

Hard Currency is Vital - USD, Euro, Yen, Yuan

Bonds - Trusted Debt Creation separate from Kings

  • Ability to generate money from thousands of wealthy owners far outstripped the ability of "nobility" to patronize. The ability to raise large sums allowed large enterprises to take shape!

  • Tradable bonds as a commonly used type of security, were invented by the Italian city-states (such as Venice and Genoa) of the late medieval and early Renaissance periods.

Strong Accounting and Corporate Reporting

  • The Medicis of Venice innovated the double entry accounting system
  • The trading houses of London had to report the shipping and trading accurately to hundreds of "investors".

Connectivity to Trade Routes - Venice, Aden

Strong National Economy

Size of Stock Exchange, and Regulation fair to Investors

  • Part of the reason of NYC dominance is Wall Street, home to world's largest Stock Exchange.
  • The New York Stock Exchange (NYSE), and
  • NASDAQ (National Association of Securities Dealers Automated Quotations).

  • Despite its failings in protecting the "Too big to fail" banks of 2008, the SEC and Full Disclosure Regulations do prevent Insider Trading and other manipulations. For example compare the severe requirements for listing on NYSE vs the murky financials of Chinese stocks!

Ability to do Underhand Deals

Critical Mass - Focus of Rising Industries

  • Why did San Francisco not emerge as a major center even though tech is obviously centered there!

Free from Regulation

Good lifestyle for Elites who have the money

Rapidly Rising Chinese Banks - Shifting Locus to Asia

NYC and London face new competitors including fast-rising eastern financial centres such as Hong Kong and Shanghai.

When will USD lose Reserve Currency Status?

  • The rise of a multipolar world with new regional powers and global capitalism, numerous financial centres have challenged Wall Street, so now Asia will be the focus of new worldwide growth.

Global Centers

New York City - Wall Street

Wall Street or the "Financial District" occupies 0.7 mile long street running eight blocks in Lower Manhattan..

  • 2009+ role declined with the stench of the Great Recession, and Too Big to Fail which painted US banks like Goldman Sachs with the black face of CDOs, etc.

  • NYSE is one core to NYC The NYSE and NASDAQ are the two largest stock exchanges in the world.

    The “raw” value of domestic and international financial activity like managing assets and issuing equity underscored the position of New York as the world's leading financial centre. New York City remains the largest centre for trading in public equity and debt capital markets, driven in part by the size and financial development of the U.S. economy. New York also leads in hedge fund management; private equity; and the monetary volume of mergers and acquisitions. Several investment banks and investment managers headquartered in New York City are important participants in other financial centres.

The New York Federal Reserve Bank, the largest within the Federal Reserve System, regulates financial institutions and implements U.S. monetary policy, which in turn influences the world's economy.

The three major global credit rating agencies – Standard and Poor's, Moody's Investor Service, and Fitch Ratings – are headquartered or co–headquartered in New York City, with Fitch being co–headquartered in London.

Singapore - Reglobalization out of China

Singapore's attractiveness lies in its transparent and sound legal framework complementing its economic and political stability. Singapore has transformed its economy despite the disadvantages of limited land and resources.

Singapore financial center supports its diversified and specialized across industries such as chemicals, biomedical sciences, petroleum refining, mechanical engineering, and electronics.

Singapore has deep capital markets and is a leading insurance and wealth management marketplace.

It has a disciplined and efficient workforce with half of the population made up of people of Chinese, British, Indian and Malay origin.

London "The City" - Trade, Bullion was key - now falling, Rapidly declining on Brexit

London today is the world’s largest center for foreign exchange markets, derivatives markets, and money markets. It also leader in the issuance of international debt securities, trading in precious and base metals, and international bank lending.

Core of the City is the London Stock Exchange and the Bank of England, the second oldest central bank.

  • Canary Wharf to the far east hosts a secondary financial district.

During the 20th century London played an important role in the development of new financial products such as the Eurodollar and Eurobonds in the 1960s, international asset management and international equities trading in the 1980s, and derivatives in the 1990s.

London continues to maintain a leading position as a financial centre in the 21st century, and maintains the largest trade surplus in financial services around the world.

London is the largest centre for derivatives markets, foreign exchange markets, money markets, issuance of international debt securities, international insurance

  • Bullion WAS key - but now countries pulling deposits from London Trading in gold, silver and base metals through the London bullion market and London Metal Exchange, and international bank lending.

London benefits from its position between the Asia and U.S. time zones

  • London has benefited from its location within the European Union, though this may end following the outcome of the Brexit referendum of 2016 and the decision of the United Kingdom to leave the European Union. The European Banking Authority are in London, although the EBA is moving to Paris in March 2019 after Brexit.

History of London Rise and Likely Fall with Brexit

  • 1000 AD UK Financial centers began in 11th century England at the annual fair of St. Giles.

  • 1690s Barclays and the Bank of England. They have been around since 1690 and 1694 respectively.

  • After the revolt of Magna Carta, UK unlike most of Europe which saw constant royal turnover, has had a very stable regime.

  • 1565 Sir Thomas Gresham founded The Royal Exchange as a center of commerce for the City’s merchants and blessed with Royal patronage in 1571.
  • English Common Law was the first globally to attempt to enforce regulations on the dangerous practice of fractional reserve banking.

  • 1700 Industrial Revolution hit UK and rapid population growth of London ensued. All the new railways and steam-engine based industries needed financing,

  • Trade bounty - The warehouses were built up around the docks, ships and trade thrived on insurance - now a single ship sinking would not sink a company's fortunes. Even today the insurance industry is focused around the City’s eastern side, around Lloyd’s building.

  • 1750+ Colonial Bounty! Queen took over the East India company - the pirate organization that made UK wealthy by robbing the wealth of India, etc. - was based here.

  • 1800s - London (The City) was the world’s main business center.

  • London has been a leading international financial centre since the 19th century, acting as a centre of lending and investment around the world.–75 English contract law was adopted widely for international finance, with legal services provided in London. Financial institutions located there provided services internationally such as Lloyd's of London (founded 1686) for insurance and the Baltic Exchange (founded 1744) for shipping.

Hong Kong - Falling to Chinese grabbing control - expats don't want to be extradited

Tokyo - Fell after 1987 deflation, BoJ and super high debt!

Tokyo emerged as a major financial centre in the 1980s as the Japanese economy became one of the largest in the world.

  • The Tokyo Stock Exchange, was the largest stock exchange in Asia.

  • However Japanese invincible corporations stopped investing as they fell after 1987 deflation.

  • Now the BoJ has kept negative interest rates for long bonds, and Japan has super high debt - only sustained due to its very large positive current account balance.

  • Japanese authorities are working on plans to transform Tokyo to be a global finance center but have met with mixed success, noting that "initial drafts suggest that Japan's economic specialists are having trouble figuring out the secret of the Western financial centres' success." Efforts include more English-speaking restaurants and services and the building of many new office buildings in Tokyo

More powerful stimuli such as lower taxes have been neglected and a relative aversion to finance remains prevalent in Japan.

Toronto - Center of Canada

Boston

Chicago - Old Midwest Food, Automobiles

Regional Centers

Shanghai

Shenzen

Beijing

Abu Dhabi

National or Sub-Regional Centers

San Francisco - Center of Silicon Value VC, Technology

  • 1970s+ Silicon Valley has been the cradle of innovation for technology and electronic gadgets.

Los Angeles

  • While one of the largest ports (importing hugely from China) in the world, it somehow never managed to make to top financial centers.

Munich - never center of a Colonial Empire - twice lost WW

  • Middle ages started in the Kingdom of Germany at the Frankfurt autumn fair

Paris as center of France - Kings need to be financed

  • 1300 AD? - Champaign Fairs emerged later than UK.

Rome - Great fall for Italy

  • 800-1300 AD Italy The City State of Venice hosted the first proper international financial center. In fact, it started off as a tiny entity in the 9th century and gradually grew. The center reached its peak in the 14th century. Tradable bonds as a commonly used type of security, were invented by the Italian city-states (such as Venice and Genoa) of the late medieval and early Renaissance periods.

Seoul - Center of South Korean

Mumbai, Gujarat GIFT City

Taipei - Smaller center for Taiwan

Tax Haven Oriented

Zurich and Geneva, Switzerland

Zurich, the largest city in Switzerland, is recognized as a financial center globally.

The city has a disproportionately large presence of financial institutions and banks and has developed into a hub for insurance and asset management companies.

Its low tax regime makes Zurich a good investment destination, and the city attracts a large number of international companies.

Of course Switzerland has been a haven for the uber-wealthy from Nazi secret gold to holding Black money for infamous corrupt politicians from all over the world.

Dubai in UAE

Bermuda

Cyprus - Russian Billionaire money


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