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Four global new markets power ahead as the rest are left reeling behind Back  
Grant Thorton’s global new markets guide 2005 reflects the disparity there is in the world’s markets. ESDAQ, TSX-V, NASDAQ and AIM have provided investors with the highest returns of any global new market for the past three year period, while other markets have experienced a period of levelling off.
This year’s Grant Thornton global new markets guide of the thirty-six stock markets competing to list growth company stocks reports a mixed success. This mixed year is due to the divergence in the global markets as is noted by Grant Thornton capital markets international director, Philip Secrett, ‘some of the world’s key markets showing measured growth, but with some markets losing companies or experiencing a downward re-adjustment to their index values.’

The report reduces its scope to markets that are new, have been in existence for four years, list forty companies and a minimum market capitalisation of $3billion. Ten companies fit these criteria: AIM, GEM, KOSDAQ, Mothers Market, NASDAQ, Nouveau Marche, Nuovo Mercato, Ofex, SESDAQ and TSX-V.

The share indices from the report show that market performance has been mixed with those in Canada, the UK and the US showing steady but appreciable growth, while those in other parts of the world have seen a levelling off in their performance. For example, SESDAQ experienced a peak in performance towards the end of 2003 and this has now levelled off.

However, the Nasdaq is key and should be given particular consideration as the Nasdaq dwarfs all the other new markets combined. Not only through size but Nasdaq has a substantially different type and size of company listed. It can also be regarded as the benchmark for growth companies around the world.
The report is broken up into different sections highlighting the various factors of the global new markets:

• New listings
For some growth markets including AIM, GEM, KOSDAQ, Mothers Market and SESDAQ, the last year has seen record numbers of companies obtaining a listing, and a ready supply of investors willing to invest in the high growth companies typically listed.

Despite this mixed performance, the UK’s AIM and all the Asia Pacific markets increased their total numbers of listings during 2004. Other European and North American markets have continued a marginal drop in listings over the last three years.

• Liquidity
The report shows that smaller new markets are often affected by poor liquidity due to the structure of the companies trading on them.

The highest performing markets continue to be NASDAQ, KOSDAQ and the Mother’s market. All the European new markets experienced increases in their liquidity during 2004. The Nuovo Mercato continues to show consistently high liquidity within Europe and in North America NASDAQ is a clear leader.

The markets in some countries remain stubbornly illiquid or have attracted too few companies to offer an efficient market.

• Monthly average turnover
The largest increase in average monthly turnover enjoyed by the Mothers Market, but with the fall-off in the average monthly turnover for the other Asia Pacific markets. Other world markets experienced notable increases.

• Market capitalisation
There have been world wide increases in average market capitalisation.

AIM, the Mothers Market and SESDAQ have enjoyed the largest percentage increases in market capitalisation, although other markets, including GEM, the Nuovo Mercato and NASDAQ also appreciated noticeably’.

• Volatility
Most markets had volatility of between 1 per cent and 9 per cent during 2002 and 2003, but during 2004 the maximum volatility on any market was 4 per cent reflecting the general stability in all markets.
New growth markets have entered the fray during the past twelve months including Alternext, a growth market established by Euronext , and AltX, a junior market established by the Johannesburg Stock Exchange.
Grant Thornton’s Secrett believes we have to hold off any decisions on whether ‘the benefits of more efficient and lower cost trading mechanisms can overcome some of the more unusual challenges of combining entities that remain symbols of national identity.’

Secrett believes the answer to this mixed market situation is for companies to have the freedom to list on any number of exchanges, no matter where they originate. He says there has been some attraction to growth markets by international companies but these have mainly been those with a particular regional or sectoral leaning. Secret says however, ‘that for companies outside specific sectors or regions… international listing options can be extremely limited.’ He summarises by saying new markets appeal mainly to small to mid-sized companies as they usually find difficulty in attracting international investment maintaining their local niche relevance.

Secrett says that, ‘Consolidation of exchanges continues to change the face of global equity markets with an inevitable effect on the world’s growth markets. The world has witnessed renewed consolidation’ in Europe and the US. ‘Whilst the logic for further consolidation amongst exchanges remains constant, time will tell whether the benefits of more efficient and lower cost trading mechanisms can overcome some of the more unusual challenges of combining entities that remain symbols of national identity.’

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