Data from the World Federation of Exchanges has revealed that less cash equity was traded globally and there were fewer initial public offerings globally in the first half of 2023 compared to the same period last year.
The Punch reported that the reduction was attributed to a number of geopolitical and economic concerns that the markets encountered during the first half of 2023.
This was according to a statement from WFE, the international industry organization for exchanges and central clearing counterparties.
The federation claimed that the failure of banks reported in Europe and the United States was made worse by the effects of the conflict in Ukraine.
It went on to say that because central banks were required to continue tightening monetary policy as a result of persistent inflation, share prices have been under pressure as a result of interest rate increases.
“These market tensions are reflected in our data for the first half of 2023. Most significantly, we observe a decline in worldwide IPO activity and investment flows compared to the same period in 2022, suggesting that businesses and investors are continuing to exercise caution. Only a small number of markets, most notably the US, provided these metrics with a positive trend.
“In a similar vein, trading activity in cash equities declined across regions, indicating a decline in interest in market participation. On the other hand, we see an increase in the volume of exchange-traded derivatives, particularly for commodity and interest rate contracts, which is consistent with the need to manage the risks and uncertainty brought on by interest rate hikes, the geopolitical environment, and inflationary fears, according to a portion of the statement.
The Chief Executive Officer of WFE, Nandini Sukumar, commented on this situation by stating, “The first half of the year has been difficult for markets and IMF estimates for global GDP project a delayed recovery.”
“The trajectory of inflation will be watched closely when the year’s second half begins. The tendencies we observed in the first half would be lessened if inflationary pressures decreased and monetary policy tightened less, as we would anticipate greater market confidence.
“Our new data indicates a slower economic recovery than was expected as geopolitical and economic tensions have taken their toll,” continued the Head of Research at WFE, Dr. Pedro Gurrola-Perez.
“Particularly, the decline in investment flows and the number of IPOs points to the persistence of the uncertainty that businesses and investors experienced in the previous year.”
According to WFE’s predictions for the second half of the year, a decrease in inflationary pressures and a slower tightening of monetary policy may help to temper the aforementioned developments.
The IMF still expects the rate of global growth to decline, from an anticipated 3.5% in 2022 to 3.0% in both 2023 and 2024.
“If these forecasts are accurate, we anticipate that the reversal in these trends won’t likely occur until the end of 2024,” WFE said in its conclusion.
