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Oecd equity-review-asia-2019


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Asia is rapidly growing into the world’s largest stock market. In 2018, 51% of all equity capital raised through initial public offerings (IPOs) went to Asian companies. Today more than half of the world’s listed companies are from Asia. This development is reshaping global stock market in several ways: Households outside of Asia have increased their investments in Asian companies through pension funds, mutual funds and other intermediaries; it is increasingly common that listed companies are majority owned by the public sector or by other private companies; and smaller growth companies from Asia are using capital markets to raise money more extensively than smaller companies from the rest of the world.

This report provides a comprehensive and comparable analysis of world developments and the growing role of Asian capital markets since the mid-1990s. It focuses on primary equity markets, growth company listings, investment banking activities and ownership structure of publicly listed companies. It also contains a special chapter on how companies use foreign public equity markets to raise capital and to cross-list their shares.

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Oecd equity-review-asia-2019

  1. 1. OECD Equity Market Review ASIA 2019 KEY FINDINGS 27 November 2019
  2. 2. Public equity is the largest market-based investment opportunity available to the general public • Publicly traded equity still dwarfs all other market-based investment opportunities that are available to the general public. • Publicly traded equity has a global value of USD 85 trillion. This is equivalent to global GDP in 2018. • Total outstanding value of non-financial corporate bonds is USD 13 trillion and private equity funds is around USD 3-4 trillion. • Public equity gives the opportunity to a large number of households to directly or indirectly protect and increase the value of their savings. • Public equity also allows investors to spread risk and lowers the costs of capital for long-term investments that have uncertain outcomes, such as R&D.
  3. 3. The global shift in equity markets • Both the number of IPOs by US and European companies and the amount of equity capital that they raise have decreased. The development in Asia is the opposite. • Asian non-financial companies raised an annual average of USD 67 billion during the past decade. This means that they surpassed the combined amount raised by companies from Europe and the United States. Source: OECD (2019), Equity Market Review of Asia 2019. IPOs by Asian, EU and US non-financial companies 46 67 500 540 580 620 660 0 20 40 60 80 2000-2008 2009-2018 2018 USD, billions No. of companies 33 27 90 100 110 120 130 140 150 0 10 20 30 40 2000-2008 2009-2018 2018 USD, billions No. of companies 45 24 100 150 200 250 300 350 0 10 20 30 40 50 2000-2008 2009-2018 2018 USD, billions No. of companies 500 520 540 560 580 600 620 640 0 10 20 30 40 50 60 70 80 2000-2008 2009-2018 Amount raised, annual average Number of new listings, annual average (RHS) Asia European Union UnitedStates
  4. 4. Asian companies rank high in number of IPOs globally • Chinese companies have been the most frequent users of IPOs during the past decade. India, Korea and Japan also rank high among the top 20 jurisdictions by number of non-financial IPOs. • Asian emerging economies, such as Viet Nam, Thailand, Indonesia and Malaysia, rank higher in terms of IPOs than most advanced economies. • In 2018 alone, 748 Asian companies joined the public equity markets. This was more than 60% of the total number of non-financial company listings worldwide. Top 20 jurisdictions by number of non-financial company IPOs during last 10 years Source: OECD (2019), Equity Market Review of Asia 2019.
  5. 5. Changing character of the companies using the stock markets in advanced economies • In the United States, growth company listings dropped from 80% during the period 1995-1999 to 50% since 2000. Germany and the United Kingdom follow a similar long term trend. • However, Japan, Korea and Hong Kong (China) have all seen an increase in growth company listings. China and India have hosted 1/3 of the world’s growth company IPOs in the past five years. • Asian growth companies today are the largest users of primary equity markets worldwide. The share of growth company IPOs in the total number of non-financial company IPOs Source: OECD (2019), Equity Market Review of Asia 2019.
  6. 6. Already-listed companies have raised USD 11 trillion since 2000 • Secondary public equity offerings (SPOs) are a source of equity capital for companies wanting to undertake new investments or to bridge a crisis. • The number of non-financial companies using SPOs over the last decade increased in all markets. • This increase coincides with a time when interest rates were historically low, which made debt financing more favourable and when financial companies made extensive use of secondary public offerings to recapitalise themselves in the wake of the financial crisis. Source: OECD (2019), Equity Market Review of Asia 2019. Secondary public offerings by non-financial companies
  7. 7. Stock markets have become more integrated • On average, at least 30% of public equity investments at the market level come from foreign investors. • In almost all Asian jurisdictions non-domestic institutional investors hold a larger share of the public equity market than domestic institutional investors. • Emerging Asian markets already account for 72% of the MSCI Emerging Market Index, which is tracked by a large number of global institutional investors. Source: De La Cruz, A., A. Medina and Y. Tang (2019), “Owners of the World’s Listed Companies”, OECD. Domestic and non-domestic institutional ownership
  8. 8. Asian companies are important issuers also in foreign markets • Almost 8 000 companies worldwide raised a total of USD 1.4 trillion in foreign public equity markets between 1995 and 2018. • At the end of 2018, 510 Asian companies were listed on a non-domestic market without having a domestic listing. • An additional 120 Asian companies were cross-listed on both domestic and foreign markets. Foreign listed companies Cross-listed companies Source: OECD (2019), Equity Market Review of Asia 2019. 341 74 52 11 10 7 3 3 3 3 1 1 1 0 50 100 150 200 250 300 350 400 China Singapore Malaysia India Chinese Taipei Japan Korea Thailand Viet Nam Mongolia Philippines Indonesia Cambodia No. of companies 29 27 18 16 15 3 3 3 3 2 1 0 5 10 15 20 25 30 35 China India Chinese Taipei Korea Japan Singapore Thailand Indonesia Pakistan Philippines Bangladesh No. of companies
  9. 9. Asian companies often have controlling owners • In 9 out of the 12 Asian markets, the 3 largest shareholders on average hold the majority of the company’s capital. • In Hong Kong (China), Viet Nam, Malaysia and China, the average public sector ownership in listed companies ranges between 25% to 52% of the capital. • Private corporations are also large owners in Asian listed companies holding on average 25% of the equity capital. Ownership concentration at company level, as of end 2018 Source: OECD (2019), Equity Market Review of Asia 2019.
  10. 10. Stock markets are changing: investors, companies and regulators must be prepared • As a result of global stock market developments, household savings in the form of pension funds, mutual funds, insurance companies and other collective investment vehicles have increased their cross-border equity investments, in particular in Asian markets and companies. • The global integration allows companies to seek finance from a much larger pool of investors who can also benefit from investment opportunities beyond their own national borders. • But it also increases the interdependence between investors from different legal, regulatory, economic and cultural traditions. Investors, companies and regulators must be prepared to adapt.
  11. 11. Thank you for your attention! This report is part of the OECD Capital Market Series. More information about the series is available at: The OECD Secretariat welcomes any questions and comments. Please address them to: Mr. Mats Isaksson Head of Division Corporate Governance and Corporate Finance Division Directorate for Financial and Enterprise Affairs, OECD [Tel: +33 1 45 24 76 20 |]