Global capital markets have undergone a gradual shift. For creation of wealth, capital market plays a major role. But the investors have to keep track of the developments in the Global Capital Market. This article explores the changing trends of the global capital markets. Capital market is the key driver of wealth creation and growth in many countries. Though labor and product markets have been integrated globally to a great extent, capital markets remain diverse. The regulators, financial institutions and most importantly the investors keep track of the developments in the Global Capital Markets (GCM).

Financial systems developed due to the emergence of various institutions, instruments and mechanisms that allowed the transfer of public savings into investment opportunities. Households saved money in order to earn future profits, while others searched for avenues to satisfy their immediate demands. In developing countries the only avenue for savings was bank deposits and the only source of funds were bank loans. While in developed countries, people invested in banks, stocks, funds, and bonds and raised capital from equity markets or issued bonds. Hence, investors and borrowers had enough options to manage both capital and risk. The actions taken by households, businessmen and the government brought the needed cash to capital markets and enhanced their depth and higher growth compared to that of GDP.

Till the 1970s many countries practiced fixed foreign exchange rates which had prevailed since years. With the introduction of floating foreign exchange rate amongst the countries, various financial instruments opened the geographical boundaries and led to the further deepening of the capital market. The world GDP was $10 tn in 1980 and $36 tn in 2003. The major economies namely the US, Europe and Japan together contributed around 65% of the world's total GDP. The US with its GDP worth $11 tn was the largest economy and possessed a Compounded Annual Growth Rate (CAGR) of around 5.1%. Europe followed closely with $8 tn and a CAGR of 3.5% while Japan stood third with a $4.3 tn GDP by 2003.

GFS and GDP were almost equal to $12 tn in 1980. By 2003, GFS grew to thrice the amount of GDP. The financial depth defined as the ratio of GFS to GDP, grew across all asset classes, especially in private classes, which indicated economic market development. Private debt securities contributed highest (44%) to GFS, while the government securities contributed the least (17%). More liquidity was seen in GFS as the share of tradable securities such as debt and equity securities increased. Capital markets were integrated globally in 2003 (12% of US equities, 25% of US corporate bonds and 44% of treasury securities were foreign owned which were 4%, 1% and 20% respectively in 1975). Investors began to invest more in debt and equity portfolio in international markets.

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