Rapid globalisation propels IPO markets - Ernst & Young

Rapid globalisation continues to propel global IPO markets to record levels as companies, investors and stock exchanges increasingly look outside domestic markets for high growth opportunities, according to Globalisation, the fourth annual Global IPO Report released by leading professional services provider Ernst and Young.

The report identifies the key IPO trends of the past 18 months that reflect the effects of globalisation: flourishing stock markets awash in liquidity, vibrant growth in the emerging markets, escalating rivalry between the world's stock exchanges, the boom in large listings on local exchanges, and the proliferation of alternative financing options, especially private equity's emergence as a key player behind so many large IPOs.

"The availability of capital around the world and a surge in IPO-ready companies worldwide are rapidly changing the face of the world's capital markets," Greg Ericksen, Global Vice Chair, Strategic Growth Markets at Ernst and Young said.

"Eager investors seeking high-growth opportunities are heating up the fast-growing emerging markets, prompting the rise of more world-class financial centres as local exchanges become more liquid, stringent, and up-to-date all of which has led to a sharp rise in large listings on local exchanges."

As capital becomes more global, the vast majority of IPOs stay local, according to the report. Around the world, 90% of the world's companies choose their primary place of listing in the market where they operate.

The growth of local liquidity and international investor interest has enabled even the largest of companies to list at home.

"Most companies prefer to stay local for their IPOs since their customer base is usually local, and it is local investors who best understand their business," Ericksen says. "For most companies, the local markets are where infrastructure, investors and liquidity can most easily be found, and where investor relations, regulatory frameworks, and market expectations are the most familiar."

In 2006 the amount of capital raised worldwide by companies going public reached a record US$246 billion, up from US$167 billion the previous year. China's companies raised the most capital at US$56.6 billion, followed by US companies with total proceeds of US$34.1 billion, and Russia's companies with US$18 billion in funds raised.

The number of listings was also up to 1729, the highest number in a calendar year since 2000. The US launched the highest number of IPOs with 187 listings, followed by Japan with 185, and China with 175.

The trend of very active IPO markets has continued in the first quarter of 2007 with US$36 billion being raised in 372 IPOs worldwide, an increase on the same quarter of last year in terms of both capital and the number of listings.

The emerging markets remain the wellspring of the world's most vibrant growth stories, with China fuelling Asian markets, and Russia driving European markets.