Global Financial Stability Report: Market Developments and Issue June 2002 (World Economic & Financial Surveys)

The Global Financial Stability Report, published four times a year, provides timely and comprehensive coverage of mature and emerging financial markets and seeks to identify potential fault lines in the global financial system that could lead to crisis. It is designed to deepen understanding of global capital flows, which play a critical role as an engine of world economic growth. The report replaces the annual International Capital Markets, published since 1980, and the electronic quarterly, Emerging Markets Financing, published since 2000. Global Financial Stability Report......Page 1 CONTENTS......Page 3 PREFACE......Page 6 Corporate Profitability Impacts on Financial Markets......Page 7 Corporate Profitability and the Banking Sector......Page 8 Local Equity Markets......Page 9 Mature Markets......Page 11 Mature Market Vulnerabilities—The Weakness in Japan’s Banking Sector......Page 22 Emerging Market Developments and Financing......Page 24 References......Page 35 Insurance and Reinsurance Financial Activities......Page 36 Financial Efficiency and Stability Questions Raised by Insurers’ Financial Activities......Page 45 Some Concluding Thoughts......Page 51 References......Page 52 Emerging Market Equities as an Asset Class for Foreign Investors......Page 54 Domestic Equity as an Alternative Source of Funding......Page 62 References......Page 65 World Economic and Financial Surveys......Page 66 The Global Financial Stability Report (GFSR) provides expert and up-to-date analysis of global capital flows that play a critical role in world economic growth and Financial stability. The report focuses on current conditions in global Financial markets, analyzing Financial imbalances and structural issues that could pose risks to stability and sustained market access by emerging market borrowers. Along with the IMF's semiannual World Economic Outlook, the GFSR is a key vehicle for communicating the IMF's multilateral surveillance. The GFSR also draws out the Financial ramifcations of economic imbalances highlighted by the WEO, making it an indispensable companion publication. Annotation This is the second in a new series of quarterly assessments of global financial markets (which replaces two IMF publications: the annual International Capital Markets Report and the quarterly Emerging Market Financing). The report is part of a broad effort by the IMF to strengthen bilateral and multilateral surveillance of international financial markets, with a view to promoting global financial stability. Issues considered in this edition include: recent developments in international capital markets; the financial market activities of insurance and reinsurance companies; and emerging equity markets This is the second issue of the Global Financial Stability Report, a quarterly publication launched in March 2002 to provide a regular assessment of global financial markets and to identify potential systematic weaknesses that could lead to crises. By calling attention to potential fault lines in the global financial system, the report seeks to play a role in preventing crises before they erupt, thereby contributing to global financial stability and to the prosperity of the IMF's member countries This particular issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, assest management companies, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies in China, Germany, Hong Kong SAR, Hungary, Italy, Japan, Poland, Singapore, Switzerland, Thailand, the United Kingdom, and the Unitted States. The report reflects mostly information available up to May 10, 2002 The economic recovery that began during the first quarter of 2002 has brought improvements in financial market conditions.