THE WORLD FEDERATION OF EXCHANGES PUBLISHES 2017 FULL YEAR MARKET HIGHLIGHTS

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The World Federation of Exchanges (“The WFE”), the global industry group for exchanges and CCPs, on Thursday 15 February 2018 published its 2017 Full Year Market Highlights report.

2017 ended on a strong note for stock markets worldwide. Benchmark market indices soared to record-high levels in markets across the globe, setting the backdrop for market activity in 2017. Market valuations soared and IPOs rebounded; however, secondary market activity was muted with value and volume of shares traded and investment flows through already-listed companies down on 2016.

KEY HIGHLIGHTS

  • Global market capitalisation was up 22.6% on 2016.
  • Value of share trading and the number of trades declined by 2.6% and 5.1% as compared to 2016.
  • New listings and investment flows through IPOs were up 47.8% and 50.6% respectively on 2016.
  • Exchange Traded Derivatives (ETD) volumes ended the year up 0.6% on 2016, driven largely by increases in volumes traded of single stock options, stock index options and interest rate futures.

Nandini Sukumar, CEO, The WFE commented: “Today’s report looks back at an exceptionally strong year for stock exchanges worldwide, with many indices climbing to record peaks.  Set against the current backdrop of widespread market volatility, however, we are reminded once again of the resilience and stability of exchanges and CCPs, and their ability to successfully steer through periods of profound unpredictability.”

According to the WFE’s full-year statistics, the key trends of 2017 when compared to 2016 were as follows:

  • Total domestic market capitalisation at the end of 2017 was 22.6% higher than as at end 2016, reaching a new record high of $87.1 trillion, an all-time high for the five-year period under review, globally and regionally. This increase was driven by an uptick in domestic market capitalisation across all regions: the Americas up 17.8%, Asia-Pacific up 27.6%, and EMEA up 24.3% on 2016.

This increase in domestic market capitalisation was against a backdrop of a synchronised global recovery in GDP growth rates, the continuation of accommodative monetary policy in many regions, low levels of inflation, low market volatility, recovering commodity prices and strong corporate profits. One of the key highlights of 2017 was the sustained period of record low volatility and increases in stock market valuations across many markets, despite ongoing political tensions in the domestic and international geopolitical space.

The momentum in markets was also sustained by market participants who appeared to be pricing in expected future gains from developments such as the tax overhaul by the US government, the Chinese government agenda to lower financial risk and implement structural reforms, the bank recapitalisation programme in India, gradual progress on Brexit negotiations, and election outcome driven optimism in Europe.

Both developed and emerging markets posted strong gains in market valuations – with a noteworthy 70.1% increase in the domestic market cap of the Argentinian market (Bolsa de Comercio de Buenos Aires) against a backdrop of sweeping structural and economic reforms.

  • In the presence of such ripe market conditions, 2017 was also a comeback year for IPOs with over 1,700 new listings, the highest number of IPOs in a year since 2007.  The number of new listings and investment flows through IPOs was up by 47.8% and 50.6% respectively on 2016. All the regions recorded an uptick in IPO activity and capital raised.

In the Americas, IPO listings and investment flows were up 85.1% and 146.2% on 2016. In the US, which accounted for a major share (65.7%) of the IPOs in the region, technology and healthcare companies accounted for a bulk of the IPOs and there was a surge in the number of Asian companies listing on US exchanges. Canada’s TMX Group also saw an increase in the number of companies going public, particularly in the mining and energy sector, while Brazil’s B3 and Mexico’s BMV exchanges saw some much-anticipated IPOs such as of Petrobras Distribuidora SA (Energy) and Jose Cuervo (Consumer staples) take place in 2017.

In the Asia-Pacific region the increase in the number of listings and investment flows through IPOs was 40.4% and 21.3% on 2016. Some key highlights included an increase in the number of listings due to faster regulatory approvals for IPOs in China; a surge in the number of tech company listings on Hong Kong Exchanges and Clearing; and a wave of insurance companies going public in India (BSE Ltd and NSE India).

In the EMEA region, there was a 53.4% and 69.7% increase in the number of new IPO listings and capital raised through IPOs. Over 80% of the exchanges in the region recorded an increase in the number of IPOs on 2016. LSE Group accounted for the largest share of new listings (38.1%) in the region despite ongoing uncertainty due to Brexit, followed by the Nasdaq Nordic exchanges with 86 new listings in 2017 (23.7% of new listings in the region).

  • Non-IPO listings, which accounted for about 36% of the total new listings, were up 49.1% on 2016, with only the Americas experiencing a decline (down 9.3%). Asia-Pacific and EMEA listings were up 8.7% and 176.3% respectively.
  • Investment flows through already listed companies were, however, down 3.9% on 2016 with declines in the Americas and Asia-Pacific (down 15.3% and 1.9%), and a marginal increase in the EMEA region (up 1.4%).
  • Overall, the total number of listings was up 1.5%, with only the Americas experiencing a slight decline on 2016 (down 0.7%). In Asia-Pacific and EMEA listings were up 2.8% and 0.6% on 2016.
  • Value and volume of trades in equity shares – both were down 2.6% and 5.1% respectively on 2016.
  • Value of trading in equity shares was 2.6% lower than in 2016. The only region which saw a pickup in turnover was the EMEA region (up 3.3% on 2016); the Americas and Asia-Pacific regions were down 4.7% and 1.9% on 2016.
  • Number of trades in equity shares was 5.1% lower than in 2016, driven entirely by a 15.9% decline in volume traded in the Americas, while Asia-Pacific and EMEA were up 0.04% and 1.9% on 2016.
  • Exchange Traded Derivatives (ETD) volumes overall were up 0.6% on 2016, driven largely by increases in volumes traded of single stock options, stock index options and interest rate futures.

Volumes traded of single stock options, which account for 77% of single stock derivatives, increased by 4.8% on 2016, driven by a 3.6% increase in the Americas where over 80% of the trading takes place. The Asia-Pacific saw a significant 26.6% increase in volumes traded, while only the EMEA region experienced a decline in volume traded (down 2.4%) on 2016.

Stock index options volumes traded increased by 22.6% on 2016. In the Asia-Pacific region, where over 65% of the trading takes place, volumes traded were up 34.3% on 2016. In the Americas volumes traded were up 12.7%, while the EMEA region experienced a 3.2% decline in volumes traded.

In a year when several key central bank interest rate decisions were scheduled to take place across various markets, it was unsurprising to notice an uptick in volumes of interest rate futures traded (up 11.3%), with increases in all regions (Americas up 8.4%, Asia-Pacific up 10.3% and EMEA up 17.9% on 2016). Volumes traded of interest rate options which account for about 18% of interest rate derivatives were also up 17.6% on 2016.

While commodity futures continued to be the most actively traded contract type, for the first time in the five-year period under review, there was a year-on-year decline in volumes traded in 2017 (down 15.6%). This decline was entirely driven by the 26% decline in the Asia-Pacific region where over 60% of the trading takes place. The Americas and EMEA saw number of contracts traded increase by 6.8% and 7.2% on 2016. Commodity options, which account for a very small share of the commodity derivatives (3.9%), saw volumes increase by 0.7% on 2016.

Single stock futures volumes traded were up 19.4% on 2016.

Number of stock index futures (which account for about 42% of stock index derivatives volumes) contracts traded were down 5.7% on 2016.

Currency futures, which account for 70.5% of the currency derivatives contracts traded, saw volumes increase by 25.2% and the currency options volumes traded fell by 11.6% on 2016.

  • While Exchange Traded Funds (ETF) listings were up 5.7% on 2016, with increases across all regions, value traded was down 12.6%, almost entirely driven by the 13.9% decline in turnover in the Americas which accounts for over 85% of the value traded of ETFs. Both listings and value traded of Investment Funds were down on 2016 (9.5% and 15% respectively).

You can read the full report here.