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JAKARTA (TheInsiderStories) – The expansion of global capital markets reached a new high after the financial crisis in 2018 triggered in large part by the United States (US) economy. Companies must now consider a series of developing problems that can affect the shape of capital market activities in the future, said Price WaterhouseCoopers’s (PwC) in its latest survey.

PwC viewed, in the future the public market will still play a vital role in the health of the economy, both in the world of developed and emerging market.

However, in addition to the natural evolution of the domestic capital market, better infrastructure and underlying trends in GDP, the future growth of the public equity market will still be influenced by various other factors, including private equity, technology, privatization, and agreements.

In 2018, PwC conducted a follow-up survey in 2011, reflecting the level of optimism after the financial crisis, especially for emerging market. Given the dynamics of growth at that time, emerging market hopes were – especially China and India – to dominate the global equity market in terms of issuance, sources of capital and the influence of their stock markets.

This latest survey shows ongoing recognition of the growing role of the emerging market, but also reflects radical modifications from the perspective of business leaders. Even though domestic market continued to be favored for listings, their superiority over emerging market has narrowed significantly since 2011.

The dominance of the New York Stock Exchange (NYSE), Nasdaq, London Stock Exchange (LSE) and Hong Kong Stock Exchange (HKEX) is not as good previously, with Indian exchanges, Shanghai SSE and Bovespa Brazil rose in rank, in recognition of the maturity of the emerging market.

Other exchanges that are becoming more attractive are the Australian Securities Exchange (ASX) and Singapore Exchange (SGX), which reflect the growing importance of the Southeast Asian region.

When looking towards 2030, still expect companies from China and India to dominate publishing, the views on leading exchanges have changed dramatically. In 2011, the medium-term outlook of the four exchange objectives was very different – with Shanghai in the top position, Indian exchanges in number three and Brazil’ Bovespa in fourth place.

The respondents thought that emerging market exchanges, especially China and India, would grow rapidly to rival – if not displace – domestic market exchanges, especially London and New York. Slower than expected, EM exchange is shown when comparing the size of exchange between the US and Greater China now and in 2011.

The combined US domestic market capitalization totaled US$30.4 trillion, for mainland China and Hong Kong $10.1 trillion from 2011, $15.6 trillion and $5.7 trillion, respectively.

PwC’ survey also indicated private markets are seen as complementary to the public market, not as rivals. Meanwhile, 70 percent of respondents felt that traditional public records became a less important source of funding.

On the other side, the most attractive private funding option is private equity (55 percent). Regardless of the findings, 70 percent agreed that most successful companies would still choose to go public at some point in its life’s cycle.

In terms of increasing capital, the US, London and Hong Kong remain superior international centers; mainland Chinese exchanges also showed strong growth. In addition to representing a significant proportion of new capital increases, the US market has been the main beneficiary of the dramatic increase in valuation of technology-related shares.

PwC’ noted the activities of initial public offerings (IPOs) since 2011 have been greatly influenced by the rise of ‘new economic’ companies, namely technology and finance dominating record-keeping activities in leading exchanges in 2016-2018.

Other well-known lists include Softbank’ IPO, which raised $21.3 billion in the Tokyo Stock Exchange in December 2018, IPO of $5.2 billion from Siemens Healthineers and Knorr-Bremse IPO at $4.4 billion in Deutsche Börse.

PwC reports, in terms of the value of the IPO per exchange, there have been significant changes back to domestic market for the past seven years. The combined value of the Shanghai, Shenzhen and Hong Kong IPOs in 2016–2018 was $142.5 billion. For the NYSE and Nasdaq, that was a little less, which was $138.6 billion. For 2009-2011, the figure was $250.1 billion and $128.9 billion respectively.

Looking at 2030, PwC anticipates that technology will remain the most important sector. Historically, the US market has become a more attractive environment for technology companies, with better valuations and a broader investor base, attracting the largest share of China’s IPO technology, including Alibaba’ IPO which reached $25 billion in 2014.

In 2011 PwC noted, China is estimated to be home to most new issuers by 2025 and India is second in terms of issuers. Today, there are significant opportunities for companies in the Southeast Asian as a large growth market on which exchanges will be considered by companies outside the local listing in 2030. Then, the growing importance of emerging markets in terms of countries expected to dominate issuance by 2030.

Written by Daniel Deha, Email: daniel@theinsiderstories.com

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