"Europe and Asia Struggle as US Listings Emerge More Attractive: A Global Financial Transformation"
The Shift Towards US Listings As Europeans Struggle and Asians Face Instability: A Global Quest
Why Companies are Increasingly Looking to US Listings Amidst Deterioration of European and Asian Equity Markets
Wall Street's adage, "The trend is your friend," may have literal meaning as global companies explore opportunities to move listings to the US. Europe's equity markets are struggling to attract new investors, and geopolitical turmoil is contributing to volatility in Asian markets, leading to a chaotic dance of liquidity and valuations. As a result, the traditional journey made annually by international financial directors to visit potential and existing investors in New York, Boston, Chicago, and Los Angeles may become mandatory and may have a new twist as comparisons of marketplace listings jump beyond performance and strategy.
Though there are stock exchanges in nearly every European country, only five of those exchanges boast market capitalizations exceeding $1 trillion. This lack of capital leads to decreasing equity valuations and diminished liquidity, resulting in lower price-to-earnings ratios. This can be attributed to smaller pools of capital and investors compared to US-based stocks. Despite calls for pooling resources to boost equity valuations, this hasn't happened. European bourses in cities like Amsterdam, Paris, and Frankfurt have mounting pressures and fierce competition, leading to the loss of some listings.
Economic strangulation throughout the Asian equity markets, ranging from trade and territorial disputes to diverse customs and languages, local pesky government regulations, sanctions, and limited foreign ownership or participation are other challenges. Although more than 40 Asian countries have their own stock exchanges, trading depends on various odd market dynamics, making analyst coverage relatively low. Notably,
Global companies are increasingly looking to the US as a better option for listing, as value stocks start to outperform growth stocks and investors shift towards defensive sectors. The lack of liquidity and lower price-to-earnings ratios on European and Asian equity markets continues to deteriorate, leading to weakened valuations and difficulties in raising capital. Europe's and Asia's leading equities markets, with a combined capitalization of $13 trillion, fall short of their US counterparts, with more than $45 trillion in value.
The US equity market stands out due to its significant participation of individual investors, accounting for around 30 to 35% of outstanding shares. Furthermore, a company's presence in US markets could significantly improve its appeal on a global level, while enhancing their visibility and driving up the value of their shares. Companies looking to list in the US must consider the financial market dynamics, accounting and reporting requirements, taxation, fees, executive time, liquidity, and ownership proportions.
Moving forward, investors should keep a close eye on trends in the global financial landscape and be prepared to make investment decisions based on the latest developments. Seeking professional guidance on investment decisions is advisable as market conditions are volatile and the situation is subject to rapid change.