How APAC exchanges can prepare for predicted growth of emerging stock markets

February 20, 2024

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The market cap of exchanges in emerging markets should exceed the value of U.S. exchanges as soon as 2030, according to Goldman Sachs economists. They have further calculated that as of 2022, the Americas accounted for only 27.4% of equity trading volumes, which is already less than half of the share of APAC’s volumes. 

India is forecast to achieve the largest increase in share of global market cap rising from 2.5-3% in 2022 to 12% by 2075. By contrast, the rest of the emerging markets’ share will grow from 13.5% in 2022 to 30% in 2075.

This increase will in part be bolstered by the region’s financial technology revenues. The Boston Consulting Group (BCG) predicts that by 2030, the Asia-Pacific will become the world’s largest fintech market, outpacing the U.S.. With nearly $4 trillion in financial services revenue pools, the historically underpenetrated market is projected to achieve a compound annual growth rate (CAGR) of 27%. BCG claims, “This growth will be driven primarily by Emerging APAC (e.g. China, India, and Indonesia), as it has the largest fintechs, voluminous underbanked populations, a high number of small and medium-sized enterprises, and a rising tech-savvy youth and middle class.”

This surge in activity will inevitably lead to a growth in trading volumes for regulated stock exchanges as companies seek to raise capital. APAC-based exchanges need to prepare as a result, ensuring their systems are resilient enough to meet increasing demand. How should they best tackle this challenge?

“Home” improvements

In order to handle both higher market activity and expanded international investment, there are a number of areas that exchanges in the region can focus on improving, for example:

  • Facilitate cross-border trading, alongside a multicurrency offering
  • Entice new participants (such as retail traders) through enhanced access to innovative trading solutions
  • Provide new product offerings
  • Offer incentivised listings to attract new companies and increase liquidity
  • Ensure compliance with ever-changing regulations is maintained
  • Invest in strategic marketing to help stand out from the competition.

The importance of investing in innovation and infrastructure

In order for exchanges to take advantage of the opportunities listed above, they need to first and foremost focus on their underlying technical infrastructure. For instance, they need to be ready to embrace new technologies, such as DLT or AI, to enhance scalability, operational efficiency and security. They also need to be prepared to continuously invest in robust and scalable tech to support growing trading volumes, and ensure a seamless trading experience. Above all, exchanges need to work together with regulators in order to create an environment for overall market growth, which in turn can foster innovation and competition in the region.

Resilience against variable environments

As APAC markets prepare themselves for upcoming growth, the regional exchanges need to be in a position to both scale and quickly adapt to new market trends. Only robust, modern, capital-markets-grade technology will help them smoothly and efficiently achieve their aims, providing them with the assuredness of resilience amidst the shifting dynamics of global market capitalisation.

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