Introduction
Emerging markets refer to those markets that are the semi-developed economies in the world. These economies show some characteristics of the developed markets but do not meet the standards of a fully developed economy. These are basically the markets that may be expected to be transformed into a developed market sometime soon. These are mostly the developing countries. These economies are characterized by high growth, high volatility, higher than average returns, and low maturity of capital markets (useconomy.about.com, 2015). Investment banks are usually those divisions of banks or those banks which deals with solving the capital issues for the corporate in any market. Investment banking involves the following functions mainly: advisory (for corporate events such as new offer, underwriting, merger and acquisitions, creating structured financial products etc.); market creation; and proprietary trading (Bennett, 2011).Besides making huge money, investment banks have a huge role to play in the emerging market economies.
Choice of Topic:
The project proposes to analyze the roles played, growth, evolution, and possible thrust by investment banks towards transforming the developing / emerging markets towards being developed ones.
Proposed Title:
"The evolution and implementation of investment banking in emerging markets"
Research Objective:
The main objective of this research is to analyze the evolution and importance of investment banking in the emerging markets through:
- Analysis of a few emerging markets in the world, their characteristics, and structures and status of their capital markets;
- Analysis of investment banking status and structure in these markets;
- A study of birth, development and evolution of investment banking in such markets; and
- Research on roles played by investment banks in such markets, towards their development.
Motivation behind the choice of this subject:
The returns that can be earned from investing in the developed markets like UK and US, in the recent past have been minimal, mainly because of slow growth in these economies. As per the research by Robeco, "it is clear that the US will be the first country to completely recover from the Great Recession, followed by Europe and eventually even by Japan, although the latter is rather a special case. In this scenario, growth could rise to 3% in the US, 2% in Europe and 1% in Japan" (Robeco, 2015). Also, as per a report by Business Insider, we may expect "2016 to be another year of low returns". It also "expects the S&P 500 to climb just 4% to hit his 2016 year-end target of 2,175" (Parker, 2015). Though, the European and Japanese markets may be expected to earn a slightly better return. "We see a lot more value in markets like Europe and Japan - we aren't bearish on the US," says Jon Adams, senior investment strategist at BMO Global Asset Management. On a contrary, the emerging markets such as China and India have witnessed over 7 % growth rates in the past year (World Bank, 2015). Therefore, for the investment banks, the emerging markets are definitely better investment options; and profitable areas to work upon. Also, they have an important role to play in the development of these markets, with their primary roles. Given this, along with lack of existing research work on this topic makes it an interesting topic to research and track the evolution of investment banking sector in such markets.
Research Methodology:
I am planning to select a few emerging markets such as China, India, Brazil, Turkey, Indonesia etc. and the major investment banking firms operating in such countries, such as Goldman Sachs, Morgan Stanley etc. Then I would make a research on their operations, services, growth, and profitability from operations in such countries. Thus, evaluating the evolution of investment banking sector in such emerging markets. I would also research on the roles played by the investment banks in the development of such markets. The data of the investment banking sector can be obtained from the national websites of these economies, whereas the financial data on profits and growth of major individual investment banks operating in such markets can be obtained from the individual firm's investor relation pages. I then propose to make a trend analysis from the above-gathered data and try to make some relevant interpretations from the same.