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Capital Formation Roundtable. Factors influencing C apital F ormation in Emerging Markets Hannes A. Takacs Orlando , 27 th March 2012. Current Status: Vicious Circle. Low market capitalization as well as trade velocity Domestic investors seek global liquidity

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capital formation roundtable

Capital Formation Roundtable

Factors influencing Capital Formation

in Emerging Markets

Hannes A. Takacs

Orlando, 27th March 2012

www.capmex.com

current status vicious circle
Current Status: Vicious Circle
  • Low market capitalization as well as trade velocity
  • Domestic investors seek global liquidity
  • Limited access of international investors
  • Going public of domestic companies on international exchanges
  • Capital markets infrastructure still in development

Marginalized capital market – a vicious circle

potential reasons for underdevelopment
Potential Reasons for Underdevelopment
  • Ownership structure of listed companies
  • Few majority owners
  • Small free float
  • Specifics of companies
  • Attractive large non-listed companies are state-owned
  • Mainly small/medium sized
  • Not listed / no intention to list
  • Rely on bank financing
  • Prefer to list abroad
  • Lack of attractive stocks
  • Few top performers
  • Corporate Governance
  • Partly weak fundamentals
  • Low shareholder value
  • orientation of companies
  • Lack of growth segment

Low quality

of supply

Low quantity

of supply

  • Venture capital market / private equity
  • Underdeveloped

Low

liquidity

Under per-

formance

Little

investor interest

  • Pension/Insurance system
  • Lack of private pension
  • schemes
  • Missing capital market orientation

Low demand of

investors

Low demand of

retail investors

  • Domestic Institutional Investors
  • Pension Funds dominate
  • Insufficient activity of other local institutional investors
  • International Institutional Investors
  • Lack of demand based on low weighting
  • of home country´s equity market in
  • international portfolios
  • Attractive home market stocks listed and
  • traded abroad
  • Private Stock Ownership
  • Low level of private stock ownership
  • Lack of awareness/education
  • Lack of strategic allocation during IPO
  • Invest outside of home country