While it's true that no one can predict exactly where stock prices are headed, it's fairly clear where the stock exchanges themselves are going: global. Over the next five to 10 years, transactions increasingly will be between companies and investors from different countries. This will have a profound impact on publicly held manufacturing companies. As investors find it easier to directly buy and sell shares in businesses that hail from all corners of the globe, they're going to put more of their dollars into those companies that offer the likelihood of greatest reward -- regardless of the location. Marginal firms -- even those that supposedly should have the hometown advantage -- will be left struggling. As a result, executives will need to take their companies' financial stories to investors around the world, much as they market their goods and services to customers in any number of countries. "Companies need to treat the global investor pool as one that can be segmented and accessed, just like selling products," says Keith Stock, a New York-based global financial services consultant with Cap Gemini Ernst & Young. The World Federation of Exchanges lists 56 members and says its members represent 97% of the world's stock market capitalization. A variety of exchanges are members, from the world-renown New York Stock Exchange (NYSE) to the lesser-known Ljubljana Stock Exchange, which was established in Slovenia in 1989. Several forces are driving stock market globalization. Institutional and retail investors are increasingly focused on higher returns and won't hesitate to head to other countries to get it, says Jos Schmitt, global head of the capital markets business with Capco, an Antwerp, Belgium-based consulting and technology provider to the financial services industry. For instance, frustrated with the generally lackluster performance of European stocks, more institutional investors there are investing in U.S. equities, says John Edmunds, associate professor of finance at Babson College, Babson Park, Mass. In addition, the hardship on countries and economies that lack a vibrant capital market is becoming more apparent, so more countries are courting investors. "The absence of exchanges leads to major costs in terms of lack of growth and challenges to creating jobs," says Glenn Yago, Ph.D., an economist with the Milken Institute, Santa Monica, Calif. Without deep, liquid equity markets, promising new ventures can't get the funding they need to get off the ground. Signs of globalization can be seen on several continents:
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