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Russia showed the fastest capitalization growth since the bottom in 2002 up to 2010: 42% CAGR

Date: 30 Jul 2011

To continue the topic from January 5, 2011 that in 2000-2009 Russian $ (nominal) GDP grew on the fastest rate than GDP of other BRICs here is similar analysis but now about capitalization of major exchanges.

Russia showed the fastest capitalization growth since the bottom of the market in 2002 up to 2010: 42% CAGR. India was the second with 39%.

Domestic Market Capitalization

Source for this and below charts:

The reason I selected the period since 2002 is that 2002 was the year with local minimum in WW capitalization. 2008 was not used for this as I wanted to capture capitalization growth on a longer timeframe.

Domestic Market Capitalization

Russia showed this growth mostly due to two big jumps in 2006 and 2007. China, India and Brazil showed just one jump in 2007. This means that in 2005 Russia was much more undervalued than the other three countries.

Domestic Market Capitalization

This picture brings the idea that for each of the key developed and emerging markets there was a several year period with extraordinary growth in capitalization. This phenomena is better to observe on a moving average charts as annual growth rates are very volatile. Below is the chart for the 3-year moving average capitalization growth rates. For example this 3 year moving average helps to eliminate the huge drop in 2008 and see the dynamics form a more distant perspective.

This data combined with other external (to this analysis) thoughts bring a hypothesis that developed markets and China have already passed their periods of fast market appreciation. Russia, Brazil and India have some hope, but the capitalization growth is not certain. Who will be the next tiger in these charts for 2011-2020? It should be a country with the highest unexpected GDP growth.


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