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A New Center of Gravity


When Neeraj Sahai become the head of transaction services in India, it wasn't derivatives like interest-rate or credit-default swaps that were traded over the counter.

It was shares. Corporate shares. Equities.

The big technical improvement back then was to take snapshots of shares, to speed up processing. The paper certificates for the shares could be sent on to the new owner, while the electronic image could be parsed for transactions details and the information be sent on for clearing and settlement.

This was not so long ago. Roughly 1992 to 1993. Less than two decades ago.

Now, Sahai is managing director and global business head of securities and fund services for Citigroup and has moved from Mumbai to New York, where his company's global headquarters is located.

But the center of gravity in world finance is swinging back ... to Mumbai. And Beijing. And Shanghai. And Seoul, etc. To Asia.

The center of financial gravity is "moving eastward, away from the transatlantic orientation that defined the post World War II era and toward Asia," said John Havens, president and chief operating officer of Citigroup, at the opening plenary session at SIBOS 2011.

"This fact is not merely a geographical issue. It also greatly affects capital flows," he said. "The coming years will see huge needs for capital in Africa, Asia and Latin America." He likened the "looming global investment boom" that will occur there to the Industrial Revolution and the reconstruction of Europe and Japan after the Second World War.

But what is really developing is an alternate world economy that does not rely on the success of the United States or Europe anymore. Brazil's trade with Asia represented just 6% of its total in 1995. In 2009 it was 18%-tripling in less than 15 years, for instance. In 1995, South Korea's trade with China was 9% of its total; by 2009, it had more than doubled to 20%.

The investing boom will mean a boom in Asian companies, issuing shares. The trick will be to make issuing, trading and processing the shares as efficiently as possible so that Asian companies can expand successfully in this alternate economy. And players from developed countries can find ways to get a piece of the action. Economic growth in China, Havens notes, is back to 10% a year. And Sahai's native India? Eight percent.