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Global Equity Markets Grow Ever More Global

Revenue sources for Morningstar Indexes' 48 country benchmarks show interconnectedness—at least among developed markets.

Read Time: 3 Minutes

Examining geographic revenue sources for Morningstar's single country equity indexes reveals that 26 of 48 markets, including the U.S., Japan, the U.K., Canada, Australia, and almost all of Western Europe, became more global since our 2022 study; 18 markets became more domestic; and four countries saw no change. Further, this year’s paper shows that 31 of the 45 equity markets we have examined since 2019 have become more global over that time.

Countries Are Globalizing Because Companies Are Globalizing—At Least in Developed Markets

To understand how revenue streams have globalized, consider firms like Meta Platforms, one of the 10 largest U.S. stocks and a global player like many tech-oriented companies. The owner of Facebook, Instagram, and WhatsApp has seen its share of revenue, sourced outside the U.S., grow over the years—the Asia Pacific region is its largest international market. Thanks to Meta and others, the Morningstar US Market Index (1,482 constituents as of May 31, 2023) has become steadily less domestic in recent years, from 66% in 2019, to 62% in 2022, to 61% today.

European markets are the world's most global in their revenue sources. The Netherlands, Switzerland, Ireland, Denmark, France, Sweden, Belgium, Germany, Finland, the U.K., Austria, and Spain all earn more than two thirds of their revenues from outside national borders. These markets have generally become even more global over the past several years. Companies like ASML Holding, Nestle, CRH, Novo Nordisk, LVMH, Atlas Copco, Anheuser-Busch InBev, Siemens, Nokia, and AstraZeneca have all diversified their revenues geographically. Morningstar estimates that the U.S. is the largest source of revenue for European markets. In fact, several European markets earn more revenue from the U.S. than domestically. These include Ireland, Denmark, Switzerland, the U.K., Belgium, Germany, France, and the Netherlands (outside of Europe, Taiwan also joins this group thanks to its largest company Taiwan Semiconductor).

Emerging Markets—Less Global and Less Globalizing

Emerging markets, China foremost among them, tend to be more domestic in their revenue sources. Egypt, China, Indonesia, the Philippines, the Czech Republic, Pakistan, Qatar, and the United Arab Emirates are the most domestic in their revenue sources of the 48 countries studied. Most have not globalized in recent years. Banks, telecom, and utilities, which tend to be more domestic than technology and healthcare-related companies, largely dominate these indexes.

Two outliers among emerging markets are South Korea and Taiwan, which source the majority of their revenues internationally. These are technology-heavy markets. South Korea's international revenues are largely driven by Samsung Electronics, a global leader in smartphones, semiconductors, TVs, and more. The Morningstar Taiwan Index is dominated by Taiwan Semiconductor, the world's largest contract chip manufacturer.

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