Financial activity is moving East

Asia, Latin America and the Middle East are the three major regions that offer the strongest opportunities for financial institutions now and in the future, according to a new report.

International legal practice Norton Rose Group published a survey of more than 200 financial institutions across five continents. It highlights the new role that growth economies play in business worldwide.

While Asia is no surprise in being identified as a primary growth region, Latin America, the Middle East and Africa also stand out as key markets for financial services in the medium to long term.

Respondents rated these economies as the best places not just as destinations for investment, but also as sources of business and capital in their own right. This was also a view shared by Josef Ackermann, CEO of Deutsch Bank, at the Ferma Forum in Stockholm (read more here).

“These findings show a shift in the financial landscape,” commented James Bateson, partner and head of financial institutions at Norton Rose LLP. “Financial institutions are no longer talking about the potential of places such as China and India. There’s a genuine recognition that, in the medium and long term, Latin America and Africa will join Asia as the real drivers of financial activity.”

Respondents made it clear that traditional financial hot spots like London and New York now have a different role to play in global markets.

The historical flow of capital from West to East is, so the report says, no longer the trend. Instead, growth markets have become a source of capital themselves.

But these new markets don’t come without risks. The survey also found the enforcement of legal rights in growth markets to be a primary concern. Most worrying were Africa and Eastern Europe. Foreign ownership restrictions and political instability are also seen as major barriers.

“There’s little doubt that the world is changing. What began as a trend before the global financial crisis hit has become cemented in the post-Lehman Brothers world;” said Bateson. “The focus for the more established financial institutions should be on understanding how to play their own part in that growth.”