WFE 2020 Market Highlights: “Global exchanges hit new highs amid disruptive events and pessimistic forecasts”
WFE has just published its latest market highlights report that studied the impact of the events of 2020 on markets across capitalisation, listed companies, IPOs, volumes and value traded in multiple assets classes including equities, derivatives futures, options and ETFs
- After a sharp 20.7% drop in the first quarter of 2020, domestic market capitalisation quickly recovered, reaching pre-pandemic levels by the end of the second quarter. Global market capitalisation passed the $100 trillion mark for the first time in November, ending the year at $109.21 trillion.
- The number of new listings through IPOs and investment flows through IPOs increased significantly, by 25.7% and 36.8% year on year respectively in 2020. There was a 1.1% increase in the number of listed companies.
- Derivatives trading rose for almost all contract types, and in all regions. Options trading increased more than futures trading. Overall, in 2020, exchange traded derivatives volumes were up 43.0% when compared with 2019, reaching a record 46.28 billion contracts traded.
Amid the worst health and economic crisis in a century, compounded by major geopolitical disruptions around the world, global financial markets continued to rise unabated to reach new heights in 2020.
In its Full Year 2020 Market Highlights report, the World Federation of Exchanges (WFE), the global industry group for exchanges and central counterparties (CCPs), observed how global financial markets had shrugged off the extraordinary events of 2020 to achieve a record-breaking year.
It noted that the magnitude of the shock from events such as the COVID-19 pandemic, the US presidential election, Brexit, the resignation of Japan’s prime minister Shinzo Abe and increased tension between the US and China, was evident, particularly in March. But despite the exceptional circumstances and even during the worst days of the crisis, markets had remarkably remained open and functioning. It observed that after the peak in uncertainty in March, markets quickly recovered. And by the end of July, most indicators registered a quick reversal to the activity levels seen before the pandemic, reflecting a strong confidence in the markets and in their role in supporting the economy.
It remarked that at the end of the year, development and approval of several COVID-19 vaccines, the final agreement between the UK and the EU, and the outcome of the US elections seemed to have boosted the confidence of investors and issuers, driving markets to end the year on a high note.
Pedro Gurrola-Perez, WFE head of research who authored the report commented, “At a time when many economic indicators are struggling to overcome the impact of the 2020 events, it is encouraging to see how swiftly market activity has recovered, reflecting a strong confidence in the markets and reaffirming the importance of their role in rebuilding the economies”.
WFE CEO, Nandini Sukumar, said, “These numbers reflect how exchanges have continued to play an active and fundamental role in supporting their underlying economies even during this unprecedented year. While 2021 will remain volatile, and much remains unknown about how and when we will find our way through the pandemic, public markets remain open for those who need them, stand ready to finance inclusive growth and support those who seek to mitigate risk.’’
Here is a summary of the highlights from the report:
Domestic market capitalisation
After a sharp 20.7% drop in the first quarter of 2020, domestic market capitalisation quickly recovered, reaching pre-pandemic levels by the end of the second quarter
In November 2020, global market capitalisation passed the $100 trillion mark for the first time, ending the year at $109.21 trillion, up 19.7% when compared with the end of 2019.
All regions registered increase compared with 2019: 21.7% in the Americas, 24.3% in Asia Pacific (APAC) and 9.7% in Europe, Middle East and Africa (EMEA). In the Americas, Nasdaq and NYSE added 46.6% and 12.5% respectively. In APAC, Shanghai Stock Exchange added 36.6%, Hong Kong Exchanges and Clearing 25.1%, Japan Exchange Group 8.5% while in the EMEA, Nasdaq Nordic and Baltic increased by 30.9%, SIX Swiss Exchanges by 9.1% and Deutsche Börse by 8.9%.
Trading value and volumes
In 2020, equity markets saw record-high levels of value traded, up 53.7%, and volumes, up 56.0%, compared with the previous year.
After reaching a peak in March, higher value-traded and volumes became the new normal, persisting through the year: in the fourth quarter, the number of trades stood at 9.54 billion and the value of trades amounted to $34.81 trillion.
In 2020, Electronic Order Book (EOB) value traded saw significant annual increases in all regions: the Americas by 58.8%, APAC by 55.8%, and the EMEA region by 26.2%, compared to the previous year.
With regards to volumes, the highest increase in the number of trades in equities took place in EMEA (68.0%) and Americas (67.2%), while APAC registered a 49.7% increase.
In the fourth quarter of 2020, the value of trading registered an increase of 57.4% compared with the fourth quarter of 2019. There was also a 60% increase in the number of trades.
While there was an overall 1.1% increase in the number of listed companies relative to 2019, EMEA accumulated three consecutive years with a contracting trend.
This result is driven by the APAC region, which saw a 2.8% rise in the number of listed companies, and the Americas (1.1%). On the other hand, we saw a contraction in the number of listed companies in the EMEA region by 1.6%, the largest annual decrease in the last three years.
New listings and IPO activity
When compared with 2019, the number of new listings through initial public offerings (IPOs) and investment flows through IPOs increased significantly, by 25.7% and 36.8% respectively. There was a 1.1% increase in the number of listed companies.
These numbers reflect how exchanges have continued to play an active and fundamental role in supporting their underlying economies even during this uncertain year.
The increase in new listings was due to an uptick in the three regions: Americas, up by 20.6%, APAC, up by 21.2%, and EMEA, up by 55.2%.
In 2020 the APAC region had the lion’s share of both global IPO listings, 63.6% share and investment flows, 53.7% share. Shanghai Stock Exchange recorded the highest number of IPOs globally with 234, followed by Nasdaq-US with 184, and Shenzhen Stock Exchange with 161.
There was a total of 1,485 new companies listed on stock markets through IPO during 2020. This is 25.7% more than in 2019.
Non-IPO listings were up 30.6% compared with 2019. The increase is mostly driven by the performance in APAC (where 90% of non-IPO listings took place), which saw a pronounced increase of 57.8%, totalling 1,223 non-IPO listings in 2020. The Americas also experienced a 19% increase, while EMEA registered a 79.7% decline.
Compared to the fourth quarter of 2019, non-IPO listings in the fourth quarter of 2020 went up by 35.1%, due to Americas and APAC regions which increased by 129.4% and 63.8% respectively, while EMEA declined by 89.6%.
Investment flows through IPOs increased by 36.8%, when compared with 2019, and by 22.8% when compared with the fourth quarter of 2019.
In December 2020, the capital raised through IPOs reached $44.78 billion and was the highest monthly amount raised in the last five years.
The increase was due to large increases in Americas, up 82.3%, and APAC, up 49.7%, while EMEA fell by 31.3%.
Most of the growth was seen during the second half of the year, with fourth quarter characterised by exceptional performance.
Investment flows through already listed companies went up by 31.8% compared to 2019, totalling $650.7 billion over the course of the year.
This increase was due to an increase in all regions: in Americas, up 16.1%, APAC, up 38.1%, and EMEA, up 34%. These numbers suggest that already listed companies conspicuously rely on stock markets to widen their growth opportunities.
Exchange traded funds (ETFs)
The value and volume traded in ETFs saw an increase during the fourth quarter of 2020 by 12.3% and 4.6% respectively.
Overall in 2020, value and volumes of trades in ETFs were up 42.3% and 73.6%, respectively, relative to 2019.
The increase in value was driven by a positive performance across all regions. It was up 37.0% in the Americas, 289.0% in APAC, and 95.9% in the EMEA region.
The same trend is apparent in the number of trades in ETFs: APAC region saw the highest increase of 187.6%, followed by EMEA of 334.3%, and by the Americas of 47.3%, which is the largest market in terms of ETF trading activity with 70.6% share.
Last year, the overall volume and value of ETFs traded reached its highest in the first quarter 2020, with 625.53 million trades generating $9.87 trillion.
Exchange traded derivatives (ETDs)
Derivatives trading rose for almost all contract types, and in all regions. Options trading increased more than futures trading. Overall, in 2020, exchange traded derivatives volumes were up 43.0% when compared with 2019, reaching a record 46.28 billion contracts traded.
In 2020, ETDs saw significant increases in volumes, mainly in single stock futures, up 99.5%, and ETF options, up 77.6%, the former being driven by the Americas, up 1,202.0%, in particular by B3-Brasil Bolsa Balcão.
Keywords: Equities, Market Capitalisation, Covid-19
Guest: Pedro Gurrola-Perez, Nandini Sukumar