Growth markets continue to offer favourable conditions for fledgling and high growth companies, with global new markets supporting companies with a combined market capitalization of US$4.2 trillion during 2005. The trend for polarization within these exchanges is evident however and the past three years has seen clear blue water separate Nasdaq, the TSX Venture Exchange and AIM from other new markets in terms of companies listed, according to Grant Thornton LLP’s 2006 Global new markets guide — insight into international capital markets.

Despite a decline in year-on-year growth, Nasdaq continued its three-year lead with 3,187 companies listed in 2005, while TSX-V witnessed an increase of 2%. AIM grew by 41%, with 1,232 companies listed and can be seen as one of the star performers of the year. Steady year-on-year growth has also been recorded for Korea’s KOSDAQ and elsewhere in the Asia-Pacific region Singapore’s SESDAQ supported 167 companies — an increase of 13% over 2004.

“We are now seeing a jostling for position in the world’s global new markets. The consolidation story played out in the international capital markets is now running in new markets. Each is seeking to attract premium listings and NASDAQ, AIM and TSX-V are setting a steady pace to follow,” said Mark Zastre, a partner with Grant Thornton in Vancouver.

New markets, once deemed of primary significance to locally-based smaller and mid-cap companies, are now increasingly attractive to international investors. Some companies are driven by poor liquidity in home markets, others seek the opportunity to gain access to a larger investor base with a larger pool of capital available for investment, while some are attracted to the regulatory structure of international markets. Certainly AIM has been particularly successful in this regard and achieved a staggering 73% year-on-year increase in market capitalization (US$78 billion in 2005 vs US$45 billion in 2004).

The Asian exchanges of KOSDAQ and Mothers Market led the charge for market liquidity, recording a significant 75% and 39% respectively for turnover of shares as a percentage of total market capitalization. For others though, markets have been persistently illiquid. SESDAQ saw liquidity decline for the third year running, as did Hong Kong’s GEM.

The onward march of China is, however, not affecting the main exchanges and the Hong Kong Stock Exchange, one of the top ten exchanges in the world in terms of market capitalization and funds raised, continues its prosperous growth. Market capitalization has grown from US$460 billion in January 2003 to US$1.26 trillion in June 2006. Total funds raised through initial public offerings and the secondary market have increased from US$27 billion for 2003 to US$39 billion in 2005.

“China has enjoyed uninterrupted and phenomenal economic growth in the past few years. For the first six months of 2006, total funds raised on the Hong Kong Stock Exchange reached US$23 billion, of which GEM accounted for US$828 million. India too is enjoying the regional upswing and capitalization on the National Stock Exchange has increased a phenomenal 152% over two years to stand at US$667 billion. Results in both countries are buoyed by substantial international interest and this looks set to continue throughout 2006,” according to Zastre.