According to Moody’s Investors Service, well-functioning capital markets are an important part of overall economic growth, fostering macroeconomic stability, access to financial services, and the overall development of economies.
Moody’s CEO Raymond McDaniel recently gave a keynote speech at the inaugural Moody’s and Shanghai Advanced Institute of Finance (SAIF) 2014 Credit Market Research Conference, commenting on capital markets and how they can be more effective:
“Developed capital markets are good at mobilizing, directing and allocating local and international savings. To be effective, they must offer a menu of risk/return options that is both suitable and useful to various types of investors and investments,” he said.
McDaniel stressed that how well or poorly a capital market functions is entirely dependent on the overall effectiveness of the system—if one part doesn’t work properly, it affects the entire system.
Better-developed markets bring a multitude of benefits, including the creation of a “safety valve” for situations when banks have lending constraints, providing better structure to capital allocation processes, and stronger market-based signals for investors.
“The global recovery is still fragile,” Raymond McDaniel warned. “In this context, getting financial markets to work well becomes increasingly important,” he said. “A strong overall market design, with appropriate macro-prudential oversight, as sound legal framework, and broad availability of information can attract and encourage participation by both domestic and foreign investors.”
The burden for creating and managing strong capital markets will fall on both the public and private sectors, added McDaniel.
The Credit Market Research Conference conference brought together academics and market practitioners from leading academic and financial institutions in China and around the world. Such collaboration between these institutions and Moody’s has enabled deepening research on credit risk and credit markets in the past year. Though the conference is open to countries and issues on a global scale, it is particularly focused in on activities in China and the wider Asia Pacific region. Find out more about the Credit Market Research Conference by visiting the website.