Global domestic market cap plummets 20.75 per cent in Q1, says WFE

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Domestic market capitalisation tumbled by 20.75 per cent at the end of Q1 2020, against the previous quarter, according to a report by The World Federation of Exchanges, a global industry group for exchanges and CCPs.

Overall, the total capitalisation amounted to USD73.14 trillion, which represented a global decrease of -20.75 per cent, with the Americas losing 22.18 per cent, Asia-Pacific down 17.48 per cent, and EMEA falling 22.79 per cent.

Compared to the same period last year, domestic market capitalisation was down 13.61 per cent. All regions were equally affected: the Americas region lost 17.28 per cent of its value, the Asia-Pacific region 12.76 per cent, and the EMEA region 7.11 per cent. 

“More than 18 trillion USD globally were wiped out by the Covid-19 crisis over the course of February and March 2020. But, even in such a difficult time, markets kept playing their role, facilitating the transfer of funds in the real economy,” says WFE. 

In the First Quarter 2020 & Full Year 2019 Market Highlights Report, WFE chose to  place its full-year statistics side by side with the statistics for Q1 2020, with the aim of helping to better understand the intensity of the shock the global economy has experienced over the last quarter, and the challenges that markets have faced. 

“In the first quarter of 2020, the global number of IPOs and the amount of capital raised significantly increased from the first quarter of 2019. Even in March, the most affected month of the quarter, we still saw more than 70 IPOs worldwide, raising more than USD5.5 billion in capital.”

As of end of Q1 2020, the value of trades in equities amounted to USD32.5 trillion, an increase of 36.13 per cent globally when compared to Q1 2019. All regions were positive: the Americas region saw a 42.29 per cent increase, the Asia-Pacific region a 25.97 per cent uptick, and the EMEA region a 42.16 per cent increase as compared to Q1 2019.

Furthermore, 225 new companies listed on stock markets through IPO in the first quarter of 2020. The number of IPOs was 6.9 per cent larger than in Q1 2019, though 53.97 per cent lower to Q4 2019. Despite the Covid-19 outbreak, February and March 2020 did not see a plunge in the number of IPOs: 74 companies listed through IPO in February 2020, and 73 in March. These figures were comparable to and even higher than several 2019 monthly figures.

The report also examined 2019’s figures. “Global stock markets started the year against the backdrop of low market capitalisation figures in 2018. As the year unfolded, however, the fears of a global economic slowdown receded, and geopolitical and trade tensions showed some respite. By the end of the 2019, most indicators were positive: domestic market capitalisation reached record high levels in markets across the globe, and investment flows through IPOs substantially increased. On the downside, there were significant declines in new listings through IPOs,” WFE notes. 

Global domestic market capitalisation in 2019 was up 25.58 per cent relative to end-2018. All three regions enjoyed an increase in market capitalisation: the Americas up 19.44 per cent, Asia-Pacific up 30 per cent, and EMEA up 31.9 per cent. 

Meanwhile, in 2019 new listings through IPOs were down 25 per cent but investment flows through IPOs were up 12.2 per cent on 2018. The combination of the decrease in the number of IPOs and the increase in the amount of funds raised suggests that companies going to market over the course of 2019 were, on average, larger in size: indeed, average investment flow per listing in 2019 was USD166.2 million, as opposed to USD113 million in 2018.

“While some of the positive indicators in 2019 are partly a result of having started the year at a low base, they are also a consequence of specific events, like Saudi Aramco’s Initial Public Offering  (IPO), the lowering of interest rates by the US Federal Reserve, and some large IPOs in the technology sector, including Pinterest,” says WFE.

Exchange traded derivatives volumes also reached record volumes in 2019, with only currency futures showing a decline when compared with 2018.   

Nandini Sukumar, chief executive officer, the WFE said: “Markets have remained open, supporting the economy during this crisis. The industry’s long running commitment and investment in business continuity planning has enabled markets to provide funding solutions for those who need it, risk mitigation and management for those who need it and for investors to take a view on the economy and on growth. As an industry we look forward to helping rebuild the global economy.”

Pedro Gurrola-Perez, head of research, the WFE said: “To better assess the impact of the economic shock of Covid-19 on markets across the globe, we have produced a report that brings together the highlights of 2019 with an update of the first quarter of 2020. When looking at the data, one cannot overstate the fact that, even during the worst days of the crisis, markets remained resilient and continued facilitating the transfer of funds in the real economy.”