Capital Market Development and “Nurturing” the IPO Market Future of Domestic Capital Markets...
-
Upload
caren-griffin -
Category
Documents
-
view
216 -
download
2
Transcript of Capital Market Development and “Nurturing” the IPO Market Future of Domestic Capital Markets...
Capital Market Development and“Nurturing” the IPO Market
Future of Domestic Capital Markets
Professor Reena AggarwalThe McDonough School of Business
Georgetown [email protected]
The World Bank/IMF/Brookings ConferenceApril, 2003
TWILIGHT OF THE LATIN BOURSE
“The days of the independent national Latin American stock exchanges could be numbered …..Hampered by low liquidity and stagnant market
capitalization growth, many bourses are in decline and facing tough competition from US exchanges.”
Emerging Markets Investor
LATIN AMERICA’S STOCKMARKETS – High and Dry
Drying Up?
The Economist
REQUIEM – POR LAS BOLSAS DE AMERICA LATINA
AmericaEconomia
THE CHANGING MARKETPLACE
• GLOBALIZATION
• TECHNOLOGY
• EXCHANGE GOVERNANCE
FUTURE OF “DOMESTIC” CAPITAL MARKETS
• TRADING IS GLOBAL IN NATURE
• INVESTING IS GLOBAL IN NATURE
• TECHNOLOGY FACILITATES GLOBALIZATION
FUTURE OF “DOMESTIC” CAPITAL MARKETS
• WHY DO WE NEED DOMESTIC MARKETS?
• LARGE BLUE CHIP FIRMS CAN RAISE CAPITAL IN GLOBAL MARKETS
• WHAT HAPPENS TO THE CAPITAL RAISING PROCESS OF SMALL/MEDIUM FIRMS?
Depository Receipt Programs
1000
1200
1400
1600
1800
2000
2200
1998 1999 2000 2001 2002
LARGE FIRMS CAN RAISE CAPITAL GLOBALLY
DOMESTIC MARKETS
• LISTINGS IN LOCAL MARKETS
• TOTAL # OF LISTINGS• IPOs• LATIN AMERICA & ASIA
1990 2000MEXICO 390 177BUENOS AIRES 179 125SANTIAGO 216 261SAO PAULO 579 467
JAKARTA 123 286KOREA 677 702KUALA LUMPUR 271 790PHILIPPINE 153 230TAIWAN 205 531THAILAND 159 381
TOTAL # OF LISTINGS IN TROUBLE ……..
# OF IPOs IN TROUBLE ……..
1996 2000MEXICO 14 2BUENOS AIRES 7 10SANTIAGO 14 5SAO PAULO 26 24
JAKARTA 16 21KOREA 51 5KUALA LUMPUR 92 38PHILIPPINE 13 7TAIWAN 36 80THAILAND 40 2
TRENDS
LATIN AMERICA
• REDUCED IPO ACTIVITY • MORE DELISTINGS THAN IPOs
• EVEN CROSS-LISTED STOCKS TRADINGAWAY FROM DOMESTIC MARKETS
IMPACT OF DROP IN LISTINGS
• DIFFICULT FOR SMALL FIRMS TO RAISE CAPITAL
• LESS CHOICES FOR INVESTORS
• FINANCIAL TROUBLE FOR DOMESTIC EXCHANGES
“NURTURING” THE IPO MARKET
REGULATORS
• REGISTRATION INFORMATION
• ROLE OF UNDERWRITERS, LAWYERS, CORPORATE OFFICERS – due diligence, liability
• DEVELOPMENT OF UNDERWRITERS
• COSTS OF GOING PUBLIC
• OVER-ALLOTMNT OPTION
“NURTURING” THE IPO MARKET
REGULATORS
• DEVELOPMENT OF VENTURE CAPITAL
• ROLE OF BANKS
• PRICING & ALLOCATION MECHANISMS
• “EQUITY CULTURE” & EDUCATION
“NURTURING” THE IPO MARKET
FIRMS
• “PREPARE” TO GO PUBLIC
• STRATEGIC PARTNERS
• SELECT UNDERWRITER
• CORPORATE GOVERNANCE
• LIQUIDITY - FLOAT
“NURTURING” THE IPO MARKET
FIRMS
• DIFFERENT CLASSES OF STOCKS
• BE PREPARED TO “Leave money on the table”
• INSTITUTIONAL & RETAIL INVESTORS
• CONSIDER LOCK-UP
• CONSIDER OVER-ALLOTMENT
“NURTURING” THE IPO MARKET
CAN BENEFIT
• ECONOMC DEVELOPMENT• ISSUERS• INVESTORS• EXCHANGES