Global capital markets reached new post–financial crisis highs in 2018. This expansion was largely driven by the US economy. Companies now have to consider a growing range of issues that may affect the shape of future capital market activity, such as an increasing focus by regulators and investors on sustainability and governance, and mounting concerns around deglobalisation, rising populism and greater geopolitical risks.
In 2018, The Economist Intelligence Unit conducted a follow-up to a 2011 survey on behalf of PwC, asking nearly 400 executives at companies from across the globe for their views on the factors that are defining the development of global equity capital markets. This report marks the evolution of these industry leaders’ views.
The 2011 report reflected a degree of post–financial crisis optimism, particularly for emerging market (EM) equity markets. Given the growth dynamics at that time, expectations were for EMs — particularly China and India — to increasingly dominate global equity markets in terms of issuance, sources of capital and the influence of their stock exchanges. The latest survey does demonstrate a continued recognition of the growing role of EMs, but also reflects a sometimes radical modification of business leaders’ perspectives.
- Although developed market (DM) exchanges continue to be favoured for listing, their lead over EMs has narrowed significantly since 2011. The dominance of the New York Stock Exchange (NYSE), the Nasdaq, the London Stock Exchange (LSE) and the Hong Kong Stock Exchange (HKEX) is not as great as before, with Indian exchanges, Shanghai’s SSE and Brazil’s Bovespa moving up the ranks, in recognition of the growing maturity of EM exchanges. Other exchanges that became more attractive are the Australian Securities Exchange (ASX) and Singapore Exchange (SGX), reflecting the growing importance of the Southeast Asia region.
- When looking towards 2030, although our respondents still expect companies from China and India to dominate issuance, views regarding the leading exchanges have changed dramatically. The same four exchanges, NYSE, Nasdaq, LSE and HKEX, are expected to maintain their leading position, reflecting their unmatched levels of resilience and liquidity advantages. In 2011, the medium-term view of the top four exchange destinations was very different — with Shanghai in the top spot, Indian exchanges at number three and Brazil’s Bovespa in fourth place.
- Liquidity remains the top priority (selected as most important by 49% of respondents) when choosing a listing location. Respondents are increasingly focused on valuations (32%) and concerned about the costs of listing (29%). Meanwhile, stock market ecosystems and the size of the investor base have become relatively less important to participants.
- Companies’ options for raising capital have increased. Some 76% of respondents believe that companies in both DMs and EMs have more choices of both public and private financing routes.
- Private markets are seen as complementary to public markets, not as rivals. Seventy percent of respondents feel that the traditional public listing is becoming a less important source of funding. The most attractive private funding option, selected by 55% of respondents, is private equity. Notwithstanding that finding, 70% agree that most successful companies would still choose to go public at some point in their life cycle.
