The latest report from the World Federation of Exchanges (WFE), the global industry group for exchanges and central clearing counterparties, has indicated a strong recovery in global market capitalization in 2023.
The report attributed the impressive performance of the investment market to the improvement in the fundamentals of listed companies, complemented by some new listings and IPOs.
According to the report, the easing of economic tensions during the year has increased valuations as investors gain confidence in the prospects of businesses and potential dividends.
The global industry group, however, reported that fewer companies entered the market in 2023 and those that did list, raised less capital as the preceding year recorded a large decrease in IPOs across the globe.
The WFE further clarified: “This trend continued in 2023, as did the amount of capital raised in all geographies save for the US, which saw a dramatic reversal compared to the previous year.
“This is reflective of the general hesitancy of businesses to list in the current environment, delaying growth plans or seeking alternative ways to raise capital.
The lower average trade size in all regions, save for the Americas, could be indicative of either an increased level of retail investors participating in public markets, or institutional investors trading less, suggesting the balance between retail and institutional investment may be changing”, the capital market group added.
The WFE stated that the Asia–Pacific (APAC) region saw the largest number of IPOs and recorded its maximum number of non-IPO listings, while the amount of capital raised through IPOs only increased (and quite significantly) in the US.
A further analysis of the report showed that global equity market capitalization in 2023 increased by 13% YoY, with all regions increasing as over USD 13 trillion were invested in stock markets worldwide.
Despite the strong equities markets’ outing in 2023, the WFE reported that number of IPOs globally was at its lowest in the last three years, with 1,217 IPOs as a total across all regions.
The report indicated that APAC markets opened their doors to 875 IPOs generating USD 75.35 billion, whilst American markets welcomed 139 IPOs generating USD 17.57 billion, and Europe, the Middle East and Africa (EMEA) markets hosted 203 IPOs raising USD 18.03 billion.
The capital raised through IPOs dropped sharply compared to 2022 (-59.3%) while APAC and EMEA regions declined -43.3% and -86.1%, respectively, the Americas experienced a significant increase of 71.3%.
Similarly, trading value and volumes in equity markets declined 10.6% and 3.4%, respectively with all regions recording their lowest annual trading values in the last three years.
On the global market outlook, WFE projected that global market capitalisation would to continue its growth trajectory, adding that there is still further recovery needed to offset the USD 25 trillion that was wiped off global stock markets in 2022.
It forecasted: “We also anticipate that the US will continue to be an attractive place for IPOs over the next year, but eyes will be on APAC to determine whether increased and sustained growth in the region can keep pace, or even outpace, the world’s most preeminent market.
“Globally, expected reductions in interest rates will facilitate credit and boost demand, stimulating business growth and increasing valuations.
“As rate cuts are broadly expected, a prolonged hold at current levels or a rise will hurt the performance of stock markets”, the WFE added.
It further predicted that several global issues could be unsettling for markets in the near term, for instance, an increase in tensions in the Gaza and Ukraine conflicts could lead to supply chain problems or volatility in energy prices that could impact central banks’ efforts to control inflation.
