GLOBAL new markets last year enjoyed a protracted and steady recovery, which has seen market liquidity improving and volatility drop substantially, according to the newly released Grant Thornton Global New Markets Guide 2004.
The improvement came despite the war in Iraq, which has failed to knock the recovery of new markets off course.
However, despite a number of new markets becoming credible by gradually improving performance and attracting quality companies, more than half of all global new markets were merely existing without much of a purpose, with some failing to attract companies and funds altogether, the guide said.
The report evaluates global new markets based on a generous analytical criteria looking at only those markets that have been in operation for more than three years, have at least 40 companies listed and a US$2bil market capitalisation. Just 10 out of the 38 new markets passed the test.
Even among these, only NASDAQ, AIM, KOSDAQ, TSX-V and only as of last year, OFEX, could be said to have added any real value to investors during 2003, the report said.
OFEX, the newcomer, had between 2002 and 2003, increased its average market capitalisation per company by 233% from US$12mil to US$40mil.
Markets such as GEM, the Mothers Market and SESDAQ have continued to produce some encouraging results, but still fall short of delivering substantial returns.
Over the last 12 months, around 10% of the world's new markets have ceased to operate, making last year's Grant Thornton prediction of a quarter of new markets closing by 2005 a very likely scenario.
The world's new markets, broadly defined as those appealing to younger, high growth companies, which was once the toast of the investment community, have suffered badly since the peak of the global economy in March-April 2000.
Samsir Jasani Grant Thornton managing partner, Datuk N.K. Jasani, said in a statement yesterday that overall, despite the proliferation of new markets worldwide, companies looking to float have little choice but to turn to their domestic markets as it is still difficult to find brokers that will support foreign shares. The sheer complexity of admission rules on many exchanges also continues to put company directors off.
Samsir Jasani Grant Thornton is the Malaysian member of Grant Thornton International, one of the world's leading organisations of accounting and consulting firms providing assurance, tax and specialist advice.
Various exchanges like Britain-based AIM has introduced steps to make it easier for foreign companies to achieve dual listings, which together with improving corporate governance standards are making brokers much more willing to back foreign companies. The next two years are likely to see a further shakeout in the new markets, with the best performing ones going from strength to strength.
Although not among the top 10 performing markets in the guide, the Mesdaq market had performed reasonably well over the past year.
The number of companies listed has gone up from 32 as at Dec 31 to 40 companies currently, a total capitalisation of about US$1.18bil.
Jasani said Bursa Malaysia should also see more activities arising from the Government's action to revitalise Khazanah Holdings Bhd's operations and the measure of achievement of government-linked companies under the new key performance indicators.
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