Banking is the dominant sector in emerging markets. For 19 of the 28 countries in the MSCI EM (Asia Pacific, excluding Japan) Index, nearly a third of their market is dominated by the banking sector. For six countries, including Egypt and Pakistan, the weight of the sector is more than half. In India, the weight of the sector is relatively moderate at 21 per cent.
Over a fifth of the inflows, on account of exchange traded funds (ETFs) tracking the MSCI EM index, are pumped into banking stocks. According to industry estimates, ETFs with assets of around $100 billion track the MSCI EM index. Experts said the domination underscores the financialisation of the world economy. The domination accelerated after the 2008 global financial crisis, which forced global central banks to take an easy monetary stance. The domination of the sector in emerging markets is equal or more than in the developed world. “Low interest rates have led to a debt boom over the last decade. Financial companies have benefited the most because of this,” said an economist.