The four top exchanges that issuers will consider beyond their home exchange in 2030 are the New York Stock Exchange (NYSE – 37%), Nasdaq (26%), London Stock Exchange (LSE – 24%), and Hong Kong Stock Exchange (24%), according to Capital Markets in 2030, new research by the Economic Intelligence Unit on behalf of PwC. The survey asked 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, following up from a 2011 report.
The report explores the changing dynamics in global equity capital markets. The report also looks at which markets are expected to lead capital raising in 2030; what are the drivers for the choice of exchange; and whether public markets are under threat.
The initial study was conducted in 2011 at a time when strong growth was anticipated in emerging economies and their equity markets. Emerging markets were expected to become the leading global exchanges for new issues in the medium term. At that time, survey respondents predicted that the Shanghai market would be the leading exchange by 2025, followed by the NYSE, the Indian exchanges and Brazil’s Bovespa.
In 2018, PwC conducted a follow-up survey to the research carried out in 2011. This latest study also recognises the growing role of capital market activity in emerging markets. Even though domestic market (DM) exchanges continue to be favoured for listing, their lead over emerging markets has narrowed significantly since 2011. We can now see that New York, London and the Hong Kong exchanges are proving to be more resilient than had been anticipated in 2011 and are now expected to maintain their strong lead.
The growth of emerging market exchanges has been more subdued than anticipated in 2011. Companies from China and India are expected to dominate issuance in 2030.
Andrew Del Boccio PwC Africa Capital Markets Partner, notes: “In our view, the public equity markets remain the natural choice of destination for investors and can play a vital role in the healthy functioning of the global economy. As our emerging market exchanges across Africa seek to deepen liquidity and attract a broader segment of companies at all stages of the corporate life cycle, our regulators will need to strike a balance between protecting investors and stimulating growth in listings,
PwC also conducted research on African debt and equity capital markets, recently issuing its 2018 Africa Capital Markets Watch publication, noting that the Johannesburg Stock Exchange, with the greatest liquidity on the continent, continues to lead African capital markets activity despite challenges facing the country’s economy.
According to the Capital Markets 2030 study, liquidity remains the top priority (selected as most important by 49% of respondents) when choosing a listing location. Respondents are also increasingly focused on valuations (32%) and concerned about the costs of listing (29%).
Which markets attract foreign issuers?
When survey respondents were asked which exchanges they think issuers consider beyond their home exchange when planning an initial public offering (IPO), domestic market exchanges continued to dominate, although the proportion favouring emerging market exchanges has increased significantly since 2011. Some 38% would consider the NYSE for a non-domestic listing now versus 74% in 2011. Similarly, London has fallen from 72% to 34%. Other exchanges that became more attractive were the Australian Securities Exchange (15%), the JSE (12%) and Singapore Exchange (11%). This clearly reflects increasing recognition that emerging market exchanges are growing and maturing to meet the needs of a wider population of issuers and investors.
Looking at the IPO pipeline, China (55%) is the country predicted to generate the most new issuers by 2030 followed by India (45%), the US (41%), Brazil (21%) and, despite Brexit concerns, the UK (18%). China and India also led in this category in our previous survey. Both have been taking steps to develop their equity capital markets, with a number of recent initiatives in China in particular.
The world has changed considerably for survey respondents since 2011. Back then, respondents were most worried by an uncertain regulatory environment (cited by 56%) and political uncertainty (33%). Now the biggest deterrents are lack of liquidity (33%) and currency volatility (29%).
PwC anticipates that technology will continue to be a significant driver in the future of public companies. Increasing efforts by leading financial centres to win over technology and ‘new economy’ companies will continue to intensify competition between the New York and China (mainland China and Hong Kong) exchanges in particular.
It is clear that in recent years companies’ options for raising capital have increased. Some 76% of respondents believe that there are now more choices of both public and private financing routes in both developed and emerging markets.
Although 70% of respondents believe a public listing is becoming a less important source of funding globally, a similar proportion of survey respondents think it would be more advantageous for successful companies to go public over some point in their life cycle. The most attractive private funding option, selected by 55% of respondents, is private equity.
Ross Hunter, PwC Global IPO Centre leader, concludes: “For companies, the choice of credible exchanges for public listings, as well as the range of private funding options, will continue to expand, adding to the alternatives when they seek to raise capital.”
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