New data published by the World Federation of Exchanges (WFE), the global industry group for exchanges and central clearing counterparties, shows that the various geopolitical and economic tensions markets experienced during the first half of 2023 have hampered expectations of a quicker economic recovery.
This was contained in a report by WFE and made available to TheTimes.
The report noted that compounded with the effects of the war in Ukraine, the Exchanges saw more financial institutions running into difficulty with the failure of some banks in Europe and the U.S.
It stated that persistent inflation forced central banks to continue tightening their monetary policy, and consequent interest rate rises have put pressure on share prices.
- “Our data for the first half of 2023 reflects how these tensions have affected markets. Most significantly, we see a decrease in the global number of IPOs and investment flows when compared to the same period in 2022, which suggests firms and investors remain cautious.
- Only a few markets, notably the US, offered a positive trend for these indicators. Similarly, trading activity in cash equities decreased across regions, reflecting less interest in participating in the markets.
- Conversely, we observe an increase in volumes of exchange-traded derivatives, especially in interest rate and commodity contracts, which is consistent with the need for managing the risks and uncertainty derived from interest rate hikes, the geopolitical landscape, and fear of inflation.
- For the second half of the year, a decline in inflationary pressures and a slowdown in monetary policy tightening may contribute to moderate the above trends; however, global growth is still projected by the IMF to fall from an estimated 3.5 per cent in 2022 to 3.0 per cent in both 2023 and 2024.
- If these projections are correct, we anticipate that it will probably not be until the end of 2024 that we will see a reversion in these trends,” the report said.
What the stakeholders said
Dr Pedro Gurrola-Perez, Head of Research at the WFE, said:
- “Our new data indicates a slower economic recovery than was expected as geo-political and economic tensions have taken their toll.
- The decrease in the number of IPOs and investment flows, in particular, suggests the persistence of the uncertainty that firms and investors faced in the previous year.”
Nandini Sukumar, Chief Executive Officer at the WFE, said:
- “The first half of the year has been tough for markets and IMF expectations for global growth project a slow recovery. As we enter the second half of the year eyes will be on the direction of inflation.
- A decline in inflationary pressures coupled with a decrease in monetary policy tightening would lessen the trends we saw in the first half as we would anticipate more confidence in markets.”