Of the 1,000 largest stock market capitals, 221 are from developing countries. Ernst & Young devoted a complete study of these foreign multinational companies.

The purchase of a division of IBM by the Chinese company Levono and, more recently, the acquisition of the prestigious brands Jaguar and Land Rover by the Indian company Tata Motors are far from being isolated incidents. According to a study by Ernst & Young published in May, multinational companies from developing countries are claiming an increasing share of the global market. This phenomenon is what the firm calls “globalisation 2.0” which is the novelty of having companies from developing countries performing at levels comparable to those of their industrialised nation counterparts. According to the study, multinational companies from developing nations made up 19% of the cumulative stock market capital of 1,000 global companies in 2007 compared to just 5% in 2000. Similarly, of the 1,000 largest stock market capitals, 221 are from developing countries as opposed to just 100 in 2000.

The trend is even more apparent at the top where there are now 8 companies from emerging countries among the global top 20 on the stock market. Nevertheless, there remains a clear distinction between the BRIC countries (Brazil, Russia, India and China), which make up 53% in number and 68% in value of these developing nation 221 companies among the world’s top 1,000. Indicators provided by the study suggest an acceleration of the rebalancing process between industrialised and developing nations. Thus, in the last five years, the sales figures of the sample group from developing countries grew by 2.9 times faster than that of industrialised nations. The trend is similar in operational margins with growth increasing by 25% in emerging countries as opposed to 14% in the industrialised world. The Stock Market reproduced a report forecasting that the sample group of companies from the developing world would grow 2.5 times faster than the sample group of companies from industrialised countries. So, who are these multinational companies from the developing world that are reshaping the global economy?

(Top 1,000 global stock market capitals Total value of stock market capital Developed economies Emerging economies (Source: Ernst & Young estimates based on Bloomberg data, March 2008). ) Three categories

Of course, at the top are the corporate giants from energy and mining sectors such as Russian companies Gazprom, Rosneft and Lukoil, Brazilian companies Vale and Petrobras, and Chinese companies Petrochina and Sinopec. A rung or too down the ladder is a group of multinationals that are already very established on the international scene, making the majority of their earnings on foreign markets. These include Brazil (Embraer, Gol, and Gerdau), Russia (Severstal), India (Ranbaxy, Infosys, and Reliance Industries) and China (ZTE and Lenovo). At this level, the Arab world is represented by Saudia Arabia (SABIC) while South Korea is represented by Hyundai Motors and Samsung Electronics. There is also a third group that is made up of companies leading at the national level that are still little engaged in international markets as they make most of their sales domestically. But, because of their size and financial clout, these companies are being called to new markets. Among them are Bradesco (Brazil), Sberbank (Russia), Tata Steel (India), Tata Motors (India), ICBC (China) and Grupo Modelo (Mexico). “A sub-group derived analysis confirms that the operational and financial performance of companies from developing countries are on average comparable or superior to their main competitors from industrialised countries.”

BY Adama Wade