A troubled first few months of 2022 have seen investor sentiment sour and risk-on assets shunned in favour of more defensive products. In Q1, equity issuance fell to 2016 levels, while debt markets saw a flight-to-quality as investors fled high-yield and exotic products.
- During Q1, global equity raisings fell to $121bn, which is a drop of 67 percent and a six-year low.
- However, investment grade issuance was up, climbing to its highest opening quarter on record with a figure of $1.3trn.
- Asia took larger slice of smaller capital-markets pie. Local currency bond offerings rose by 31 percent to $827bn.
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The first three months of 2022 have seen capital market activity abruptly return to pre-pandemic levels, with geo-political turmoil spooking investors and issuers alike.
Global equity capital markets activity dropped 67 percent to $121bn – the slowest opening quarter since 2016.
The period saw just over a thousand equity offerings, down 45 percent on the previous quarter and down nearly a half year-on-year. It is the first quarterly period since Q1 2020 when less than $200bn in new equity has been issued.
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The greatest loss of business has been in the U.S., a market that had enjoyed the greatest gains during the past two years.
Proceeds from U.S. issuers were down 86 percent year-on-year, to account for just 15 percent of the global equity market. By contrast, Chinese issuance fell by precisely half that proportion to $44bn, to take its largest ever slice of the global equity markets.
The first quarter also saw the U.S.-led, IPO boom come to a resounding halt, with U.S. listings dropping 95 percent, and the New York Stock Exchange seeing no new listing during the period.
Global IPOs fell back to a pre-pandemic trend line, at $40bn, marking a 62 percent year-on-year decline. Meanwhile, convertible equity offerings were down 73 percent globally, while secondary offerings fell 67 percent to $62bn.
Debt markets stay strong
Meanwhile, global debt issuance in Q1 saw a relatively modest year-on-year drop of 7 percent to $2.5trn. However, compared with the quarter immediately preceding it, the market was actually up 13 percent driven by high-quality credits, financials, governments and agencies.
Investment-grade debt had its strongest opening quarter since records began in 1980, up 3 percent year-on-year to hit $1.3trn in the first quarter.
By contrast, high-yield issuance fell 72 percent to $59bn, a six-year low; green bonds were down 11 percent; emerging markets bonds fell 38 percent; and international bond offerings dropped almost a quarter, compared to the same period last year.
A brighter spot was Asia’s local currency bond offerings, which leapt 31 percent to $827bn. This was driven largely by a 40 percent increase in Chinese Yuan offerings, marking its strongest first quarter since records began in 1980. However, the Japanese Yen debt hit a four-year low of JPY4.4trn.
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