Key global capital markets development and outlook

Market overview

The global capital market took a sharp turn in 2022. Stocks suffered their worst year since 2008, the S&P 500 sank 19.4%, while the Nasdaq dropped 33.1%. In 2022, the U.S. IPO activity fell to levels unseen since the global financial crisis of 2008-2009. Mainland China overtook the U.S. to take first position in terms of IPO proceeds for the first time since 2010, contributing to 45% (USD77 billion) of 2022 global IPO proceeds, compared to just 9% (USD15 billion) contributed by the U.S. The bond market also had one of its worst years, with proceeds down 17% compared to 2021 amid high interest rates. Global high-yield corporate bonds were the hardest hit, with proceeds down 77% to a 14-year low since 2008.

Key developments in global and Taiwan capital markets

Special purpose acquisition companies (SPACs) IPO activity reverted back to pre-2020 levels in 2022 globally. New SPAC issuance is likely to continue to dwindle downwards with many existing SPACs being unable to identify suitable targets to complete a transaction before their maturity. Sustainable bond markets experienced the first annual decline in a decade of exponential growth.

Globally, regulators drove new initiatives to promote the development of the capital market. HKEX proposed the new tech listing regime under Chapter 18C, which would allow specialist technology companies at pre-commercial or early commercial stage to apply to list as soon as early 2023. Recently, the China regulator announced a detailed mechanism and regulations for a registration-based IPO system across the A-share market.

Taiwan stock markets staged a superb performance in fundraising in 2022, with the total fundraising from IPO reaching NTD35.7 billion, the highest since 2017 and an 11% increase from 2021. However overseas equity deal proceeds dropped significantly in 2022. This was likely driven by the depressing international equity markets and booming local markets. In the past several years, investment grade corporate bonds, convertible zero coupon bonds and GDRs remained the top international capital-raising ways for Taiwan companies.

Key trends and 2023 outlook

Investors are increasingly looking at the company’s ESG agenda and are placing a heavy emphasis on financial fundamentals and intrinsic valuation, as opposed to market valuations emphasizing high-growth stories. They will be mindful that inflation is still high, and policymakers will likely continue raising rates, at a slower pace, as they watch for more signs of progress. Many market observers think the global capital market will rebound in 2023, particularly in the second half of the year. Despite the growing optimistic sentiment, some of the main sources of uncertainty grip the capital market, such as a danger that the U.S. economy could slip into recession, geopolitical tensions that reshape the global supply chains and increase trade costs and concerns over banks’ stability and liquidity.

^{(Data sources: FactSet, Refinitive, Taiwan Stock Exchange?}