Stock market indices scale record levels – analysing the underlying market

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In October 2017, over 50% of the exchanges that report data to the WFE saw their benchmark indices scale record high levels. Such a synchronised increase in benchmark indices across regions and in both developed and emerging markets, calls for a deeper examination of underlying market performance. We therefore examine the following indicators for key markets in each region:

  • Market capitalisation: to give an insight into market valuations- analysing change in market capitalisation in October 2017 versus October 2016.
  • Value and volume of share trading: as an indicator of market activity – analysing change in value and volume of trades in equity shares in the January to October 2017 period compared to the same period in 2016.
  • Total investment flows through IPOs and already listed companies: analysing the change in investment flows in the January to October 2017 period compared to the same period in 2016.

Americas

In October 2017, the Americas saw the Dow Jones Industrial average breach the 23,000 mark for the first time, the S&P 500 index break through the 2,500 level for the first time, NASDAQ and NYSE’s Composite Indices reach historic highs, and B3’s stock market index Ibovespa and TMX Group’s S&P/TSX composite index, climb to record high levels.

  • On average domestic market cap in these four markets in October 2017 was 20.4% higher than in October 2016.
  • At B3 all indicators were up on the previous period, including a significant 48.6% increase in total investment flows. However, in two of the four other markets, investment flows declined in the period under review.
  • Value of share trading was up and volume traded was down in three out of four markets.

Broad index trajectory since October-16

Asia-Pacific

In the Asia-Pacific region, the Japan Exchange Group’s Nikkei 225 average index recorded a 2-decade high and Topix index closed at a decade high, Taiwan Stock Exchange’s benchmark index reached a 27-year high, the SET (Stock Exchange of Thailand) Index recorded a 23-year high, Hong Kong Exchange’s Hang Seng index hit its highest point since the global financial crisis and BSE Ltd’s Sensex, NSE India’s Nifty and New Zealand Stock Exchange’s NZX 50 recorded lifetime highs in the month of October. ASX’s S&P/ASX 200 index was roughly 150 points shy of a nine-year high at its peak in October.

  • The domestic market capitalisation of all of these exchanges was higher in October 2017 when compared to October 2016 – an average increase of 21.7% year-on-year across markets.
  • Five out of the nine markets saw increase in market activity in terms of both value and volume of trades in equity shares. SET was the only market which saw a dip in both these indicators in 2017 as compared to 2016.
  • Most markets in the Asia-Pacific region experienced increased investment flows in 2017, with the exceptions being Hong Kong Exchanges and Clearing and the New Zealand Stock Exchange, where investment flows declined by 6.1% and 21.5% respectively on 2016.

EMEA

In the EMEA region, the LSE Group’s FTSE 100 and Germany’s benchmark DAX index reached record highs, while SIX Swiss exchange’s index exceeded the 9,300-point mark for the first time since the summer of 2015. In Africa and the Middle East, the JSE (Johannesburg Stock Exchange) and EGX’s (the Egyptian Exchange) benchmark indices also reached record highs.

  • Domestic market cap increased in most markets, with the exception of EGX which saw its market cap down 4.7% in October 2017 on October 2016.
  • Similarly, in most of these markets, there was an increase in market activity as defined and investment flows. The JSE was the only market which saw an uptick in the benchmark index against a backdrop of lower value and volume of trades and investment flows.

*All benchmark indices have been scaled to 100 to map the trajectory in graphs