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Equity market deal makers expect another bonanza in 2021

Matthew Toole
Matthew Toole
Director, Deals Intelligence

Further growth in equity market issuance is expected, following last year’s record-breaking year that saw capital markets come to the assistance of cash-strapped organisations. A long and fat tail of risks is depressing sentiment in Asia and Europe, while in the Americas, the SPAC boom points to continued investor appetite for risk.

  1. Another 6 percent growth in equity market issuance is expected after last year’s $1trn in equity raisings.
  2. The Americas are bullish as the special purpose acquisition company (SPAC) boom explodes into Q1 2021, following a record-breaking 2020.
  3. Investor appetite will be closely watched amid volatility and uncertainty, caused in part by the COVID-19 pandemic.

There will be no return to normality. That’s the conclusion of the world’s equity deal makers, who, following a record-breaking 2020, anticipate no let-up in equity issuance for the year ahead.

Discover the full view of what over 460 deal makers expect of 2021

Equity market boom continues

The number of equity issuances across global capital markets increased by 56 percent in 2020 to hit $1 trillion, while the average predicted growth rate in 2021 will add another 6 percent of volume, according to deal makers interviewed for Refinitiv’s Sentiment Survey.

Even if the market remains flat, as a majority of deal makers predict, this would still make it an impressive year by historical standards.

And so far in 2021, deal makers’ predictions appear to be ‘on the money’. In the first three months of the year, equity markets activity reached $346.3bn, more than double the same period a year earlier, and 7 percent up on the final quarter of 2020.

Watch: A 2021 deal making deep dive. Expectation, Sentiment and Data

Equity market expectations vary across the globe

Respondents based in the Americas are notably more bullish than their counterparts further east, with an average predicted growth rate in equity issuance of 8.7 percent. However, this optimism is increasingly confined to a small hardcore of bulls: just 46 percent of American deal-makers expect issuance growth in 2021, compared with 63 percent last year.

Again, the first quarter of 2021 suggests this bullishness is well-placed, with U.S.-based issuers accounting for 37 percent of global ECM by value, up from 28 percent year-on-year.

No comment on the U.S. equity market can ignore the spectacular rise of special purpose acquisition companies (SPACs), which have given a huge fillip to IPO markets in the first quarter of 2021, after a record-breaking 2020.

By contrast, deal makers in the fast-growing Asian economies look exceptionally pessimistic, with a 3.6 percent predicted growth rate and 69 percent of respondents expecting the market to be, at best, flat.

A similar level of pessimists in Europe likewise keep a lid on the average predicted growth rate, at 4.1 percent.

Listen in to our experts discussing how the deal making landscape looks

Risk and sentiment rule

The number of factors expected to impact equity market issuance had proliferated since the pandemic, with COVID-19-related concerns and general uncertainty and instability mentioned frequently. As a result, all eyes are on investor sentiment and risk appetite, which top the list as the defining factor for equity markets.

However, the tail of risks and factors is both long and fat, ranging from sector-specific concerns and economic conditions, through to liquidity and market stability.

Conspicuous by their absence were mentions of the U.S. presidential election, which featured in just 4 percent of interviews, or Brexit, a red-hot issue for deal makers in previous surveys, which barely featured this time.

Despite the huge upheaval across societies and economies, the sectoral composition of deal-making activity is not expected to change much. Technology continues to top the rankings, with an 8.6 percent predicted average growth rate, followed by healthcare at 7.4 percent.

Equity issuance in the telecommunications is also anticipated to have a strong year, with 5.8 percent growth predicted.

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