China has achieved yet another major milestone on its journey to economic superstardom: It has passed Japan as the second largest percentage of world market cap. According to Bespoke Investment Group, China's stock market accounts for a 7.38 per cent slice of the global total, versus 7.05 per cent for Japan's.
Of course, Japan's stock market was hammered in the wake of the devastating earthquake, tsunami and nuclear crisis earlier this month, which put China in the passing lane. Japan could easily catch up as its companies get back on their feet. Still, it's an early indication of where China is headed in the longer term. Its share of the global market was a mere 1.25 per cent in 2005.
China has some room to grow before it threatens the United States. The U.S. market has a dominant 30.43 per cent slice of the global market - although the trend doesn't look good; the U.S. share is down sharply from about 42 per cent in 2005.
Meanwhile, Canada's share of the global market continues to grow, with a 4.38 per cent slice. That's up from 2.9 per cent in 2005, due largely to the strength of commodity producers.
That's quite small, and it raises the question: How many Canadian investors limit their Canadian equity holdings to just 4.38 per cent? In most cases, Canadian investors are massively overweight the Canadian market.