- 55% share of companies worldwide listed in Asia
- USD 34 trillion market capitalisation of companies listed in Asia, or 27% of global market capitalisation
- 29% Asia’s share of global outstanding corporate bonds, nearly three times the 2000 level
Asian capital markets reflect the region’s dynamism and potential for further development
Asia represents 31% of global GDP and plays a major role in public equity markets, especially for growth companies. However, other areas of its capital market ecosystem remain underdeveloped.
Private equity financing is growing, but activity is concentrated in a few markets. While the region plays a major role in global corporate and sustainable bond markets, syndicated loan markets remain underdeveloped. There is also room for domestic institutional investors to play a greater role.
In many Asian countries, non-financial companies still rely heavily on bank financing
Despite the growing role of market-based financing in the region, corporate financing in half of the Asian countries analysed remains predominantly bank based, with a higher share of credit relative to GDP compared to the global figure. The vast majority of non-financial companies’ debt financing in Asia is bank loans rather than debt securities, which account for only 14% of total debt financing. The biggest concern lies with countries where neither credit- nor market-based financing has developed sufficiently to support economic growth and many businesses are likely to be financially constrained.
Asian economies with more developed capital markets innovate more than those with less developed markets
Capital markets have the ability to finance innovation by mobilising large-scale funding from a broad and diverse investor base, making them particularly well-suited to support ambitious, innovation-driven ventures. They also provide the risk-willing capital necessary to develop emerging technologies. Asian economies with higher levels of market-based financing are more successful at innovating.
What can governments do?
While Asia already has a solid capital market foundation, reforms are needed to improve access to market-based financing and strengthen the institutional investor base to support long-term growth.
Deepen and expand access to market-based financing
Streamlining listing procedures and aligning market regulations with international standards can increase market attractiveness. For smaller companies, proportionate and flexible listing frameworks, as well as credit guarantees and targeted risk assessments systems for issuing bonds, could ease access to financing. Emerging technologies like AI offer promising ways to connect entrepreneurs seeking capital with investors.
Increase market trust and attractiveness
Policy makers must continue to strengthen corporate governance frameworks, enforcement capacity and market practices. Given the dominance of large controlling shareholders in the region, protecting minority shareholders through stronger board independence and improved disclosure remains crucial. Improving the governance of state-owned enterprises (SOEs) and encouraging strategic listings can help these key players disseminate good practices and broaden investor participation.
Strengthen the domestic investor base
Widening pension fund coverage and moving to asset-backed pension systems can improve the sustainability of pensions in the region and provide a larger pool of long-term patient capital to support corporate investment and economic growth. Equally important is promoting retail participation through simple savings products and digital investment tools that reduce the cost of accessing capital markets.
- Build trust and scale in sustainable finance
- Support responsible AI innovation in finance
Posting by gandatmadi46@yahoo.com