ASX faces decline, but experts see cyclical pattern

The number of companies leaving the ASX in the past two years has surged to levels not seen since the early 1990s. A new academic paper commissioned by the corporate regulator suggests this trend may not signal a permanent shift but rather a regular market cycle. Despite fewer new listings and increased delistings, analysts argue it’s too early to declare a fundamental change in market dynamics.

For its research into the shift towards private markets, the Australian Securities and Investments Commission (ASIC) enlisted a Melbourne University expert to examine how the ASX compares to similar exchanges in Britain and the United States. Findings indicate that while the ASX’s global market share has declined from 2.1% in 2013 to 1.6% today, this drop is consistent with historical trends rather than an unprecedented downturn.

The study identified a slowdown in initial public offerings (IPOs), with total capital raised through new listings dropping sharply in the past two and a half years. However, past market cycles have shown similar declines before rebounding. Meanwhile, smaller companies are increasingly turning to mergers and acquisitions, taking advantage of the weaker Australian dollar, which makes domestic firms attractive to international buyers.

ASIC sees an opportunity for the ASX to rethink its approach, urging it to be more proactive in reviewing listing rules. While public markets once offered the most accessible capital, private funding now allows businesses to grow without the same regulatory requirements. This shift raises questions about long-term market trends and whether the ASX can adjust to remain competitive.

Source: Australian Financial Review, Financial News Wire, ASX, ASIC, Investor Daily.