During the year 2017, about 43% of the equities raised via world’s public equity markets was meant for various companies of Asian countries. What does this mean?
Asian corporations have made their global presence and have been successful enough to raise more equity in the stock market as compared to all the European and the US companies combined.
Among the various Asian countries China is leading in this movement. For last decade so far, few other Asian countries like Viet Nam, Korea, Thailand and Indonesia had a greater number of IPOs (Initial Public Offering) than European countries like France, Germany and Italy.
Asian capital markets are now part of the global market
Capital markets at regional level are now financing from the stock market financing and complementing to other traditional finance like bank lending. It means a new market-based mechanism has developed, which can help to allocate finance where there is scarce capital.
Since equity capital will be very well suited to any forward-looking investments like R&D and any innovation project, the increased ability to access various equity financing will have positive impact on the dynamics of Asian business sector.
As per OECD review, raising public equity by all the smaller growth-oriented companies of the Europe and the USA has almost disappeared. Now, you can see IPOs of below USD 50M going strong amongst the only developed companies of several Asian countries like Korea, Japan, China and Hong Kong.
Also, IPO numbers by Chinese growth companies has increased quite rapidly in the last five years, almost to the level of the US market, which was experienced during the completion of 1990s, which was an era when people witnessed various IPOs of companies like Amazon.
Now Asian companies will be able to obtain finance from the more developed and organized global equity markets from pool of investors worldwide because almost 50 per cent listed companies of the world are companies from Asian countries.
The other advantage is that there will be more investment opportunities and many numbers of foreign investors will be ready to participate in the emerging Asian stock markets. Today, if you look at the various institutional ownerships in the Asia, you will find approximately 80 per cent is held by foreign institutions.
As there are number of reforms going to take place and also due to recent addition of Chinese shares included in the markets index, investors can safely assume that there will be further increase of foreign institutional ownership, which will further deepen global integration of various Asian equity markets.
In this integration process, investment banking activities will also include in the market along with other services, which come with more sophisticated and developed public equity markets.
By definition, the global integration process will bring increased interdependence between various corporations and investors from countries with much different regulatory, legal, cultural and economic traditions.
One feature, which increasingly will attract attention in the emerging stock markets of Asia is the noteworthy presence of various state-owned enterprises. This can surely lead to some cross-fertilisation.
At the same time, it also creates a need for the certain common language development and also shared expectations so far as key areas of corporate governance is concerned, e.g. securities regulation, as well as company law and enforcement.