The World Federation of Exchanges (WFE) has published its First Quarter (Q1) 2020 and Full Year (FY) 2019 Market Highlights report, where the WFE have placed its full year statistics side by side with the statistics for Q1 2020, with the aim of helping to better understand the intensity of the shock the global economy has experienced over the last quarter and the challenges that markets have faced.
More than $18 trillion globally were wiped out by the COVID-19 crisis over the course of February and March 2020. But even in such a difficult time, markets kept playing their role, facilitating the transfer of funds in the real economy.
In the first quarter of 2020, the global number of initial public offerings (IPOs) and the amount of capital raised significantly increased from the first quarter of 2019. Even in March, the most affected month of the quarter, the WFE still saw more than 70 IPOs worldwide, raising more than $5.5 billion in capital.
Global stock markets started 2019 against the backdrop of low market capitalisation figures in 2018. As the year unfolded, however, the fears of a global economic slowdown receded and geopolitical and trade tensions showed some respite.
By the end of the 2019, most indicators were positive. Domestic market capitalisation reached record high levels in markets across the globe and investment flows through IPOs substantially increased. On the downside, there were significant declines in new listings through IPOs.
While some of the positive indicators in 2019 are partly a result of having started the year at a low base, they are also a consequence of specific events, like Saudi Aramco’s IPO, the lowering of interest rates by the US Federal Reserve and some large IPOs in the technology sector, including Pinterest.
Exchange traded derivatives volumes reached record volumes in 2019, with only currency futures showing a decline when compared with 2018.
Here are the key highlights Q1 2020 and FY 2019:
Global domestic market capitalisation in 2019 was up by 25.58% relative to end of 2018. All three regions enjoyed an increase in market capitalization – Americas up by 19.44%, Asia-Pacific up by 30.0% and Europe, the Middle East and Africa (EMEA) up by 31.9%.
At the end of Q1 2020, domestic market capitalisation amounted to $73.14 trillion, a 13.61% decrease when compared to Q1 2019. All regions were equally affected – the Americas region lost 17.28% of its value, the Asia-Pacific region 12.76% and the EMEA region 7.11%. The move was even more marked compared to Q4 2019 – global decrease (-20.75%), Americas (-22.18%), Asia-Pacific (17.48%) and EMEA (-22.79%).
In 2019, the value of trades in equity shares was down by 7.7%, but the number of trades was up by 13% when compared with 2018, the contrast explained by regional trends. For value traded, Asia-Pacific’s uptick of 10.9% was not large enough to outpace the downtick in both the Americas (-15.37%) and EMEA (-15.3%). And for number of trades, Asia-Pacific’s increase of 23.3% versus the Americas down by 1.7% and EMEA also down by 2.7%, was enough to drive a global positive trend.
As of end of Q1 2020, the value of trades in equities amounted to $32.5 trillion, an increase of 36.13% globally when compared to Q1 2019. All regions were positive. The Americas region saw a 42.29% increase, the Asia-Pacific region a 25.97% uptick and the EMEA region a 42.16% increase as compared to Q1 2019.
In 2019, new listings through IPOs were down by 25%, but investment flows through IPOs were up by 12.2% on 2018. The combination of the decrease in the number of IPOs and the increase in the amount of funds raised suggests that companies going to market over the course of 2019 were, on average, larger in size. Indeed, average investment flow per listing in 2019 was $166.2 million, as opposed to $113 million in 2018.
In Q1 2020, a total of 225 new companies listed on stock markets through IPO. The number of IPOs was 6.9% larger than in Q1 2019, though 53.97% lower to Q4 2019. Despite the COVID-19 outbreak, February and March 2020 did not see a plunge in the number of IPOs – 74 companies listed through IPO in February 2020 and 73 in March. These figures are comparable to and even higher than several 2019 monthly figures.
Nandini Sukumar, chief executive officer of the WFE, said, “Markets have remained open, supporting the economy during this crisis. The industry’s long-running commitment and investment in business continuity planning has enabled markets to provide funding solutions for those who need it, risk mitigation and management for those who need it and for investors to take a view on the economy and on growth. As an industry we look forward to helping rebuild the global economy.”
On the other hand, Pedro Gurrola-Perez, head of research at the WFE, said, “To better assess the impact of the economic shock of COVID-19 on markets across the globe, we have produced a report that brings together the highlights of 2019 with an update of the first quarter of 2020. When looking at the data, one cannot overstate the fact that, even during the worst days of the crisis, markets remained resilient and continued facilitating the transfer of funds in the real economy.”
Re-disseminated by The Asian Banker