basis of global sectors, or by regions of production and distribution. In
that case, a U.S.-only portfolio would be very narrow indeed.Sector Allocation around the World
Let’s take a closer look at the importance of these industrial sectors by re-
gion and by country. The 10 Global International Classification (GIC) in-
dustrial sectors in five geographic regions (United States, EAFE, Europe,
Japan, and the emerging markets)^10 are shown in Table 10-4, by the respec-
tive weight of each industrial sector. The 20 largest firms by market value
headquartered in and outside the United States are shown in Table 10-5.^11
The financial sector is the largest sector in everyregion of the world.
This demonstrates how commercial and investment banks, insurance
companies, and brokerages are critical to economic growth. The largest
share of the financial market value sector is found in Europe, belonging
to companies such as HSBC, UBS, and the Royal Bank of Scotland. The
partial privatization of the Bank of China, the Industrial and Commer-
cial Bank, and the China Construction Bank have also made this sector
the largest in the emerging markets. In the United States, the largest fi-
nancial firms are Citigroup, Bank of America, and AIG.CHAPTER 10 Global Investing and the Rise of China, India, and the Emerging Markets 175
(^10) The United States is represented by the S&P 500 Index, and the non-U.S.-developed regions are
represented by the EAFE Index (described in footnote 6), Europe (iShares S&P Europe 350, symbol
IEU), and the emerging market (iShares MSCI Emerging Markets Index, symbol EEM).
(^11) The chapter appendix gives a brief discussion of the 10 largest non-U.S.-based stocks, ranked by
market capitalization. All these are ranked by total market value, including all government holdings.
TABLE 10–4
Sector Allocation in World Regions
S&P 500 EAFE Europe Japan EmergingMarkets
Consumer Discretionary
Consumer Staples
Energy
Financials
Healthcare
Industrials
Information Technology
Materials
Telecommunication Services
Utilities
10.2% 12.0% 9.0% 20.0% 4.3%
9.4% 7.9% 9.2% 4.5% 3.8%
10.6% 7.2% 9.9% 1.1% 15.2%
21.3% 29.2% 31.1% 20.7% 21.1%
11.8% 6.4% 7.4% 5.5% 2.0%
11.3% 12.0% 8.4% 18.4% 4.8%
15.2% 5.3% 3.5% 12.7% 16.2%
3.1% 9.4% 8.2% 9.8% 15.3%
3.8% 5.3% 6.4% 3.0% 12.5%
3.5% 5.4% 6.9% 4.3% 4.8%