Looking Back, Moving Forward: Equity & Debt Capital Markets


By Gordon Platt

When volume 1, number 1 of Global Finance arrived at the airport in London on October 15, 1987, it could not immediately be offloaded.

The precious cargo was needed as ballast in the airplane during the Great Storm that night, as the UK was battered by winds of 100 miles an hour. Packing the strongest gales in nearly 300 years, the storm claimed at least 22 lives. The following Monday, October 19, stock markets crashed worldwide—except for London, which was closed due to lack of power as crews worked to clear storm debris.

In New York, the market (as measured by the Dow Jones Industrial Average) fell more than 508 points, or 22.6%, the largest one-day percentage drop in history, in what came to be known as Black Monday. The cause of the stock market crash, which ended a five-year bull market, is still being debated. Some say it was because US Treasury secretary James Baker warned West Germany that the US would respond to further German interest rate increases by encouraging a fall in the dollar. Others said portfolio insurance and program trading were to blame. One clear lesson, however, was that globalization had arrived in the financial markets.

Events in the debt capital markets were no less volatile than in the equity markets in the past quarter-century, from the “junk bond” crises of 1989 and 2001, to the current sovereign debt crisis in Europe. The success of Nicholas Brady’s 1989 plan to reduce Latin American debt loads by swapping existing debt for new bonds could offer some hope that a solution can be found to today’s debt crisis.

Looking forward, the focus of capital markets financing is moving eastward. A recent PwC survey found that more than 75% of senior corporate managers predicted China will be the home of most new issuers by 2025. One in two respondents said Shanghai would be the first choice for listing by 2025. More than 50%, however, said an uncertain regulatory environment could derail the shift to emerging markets.

For now, however, stock exchanges in developed markets far outstrip those in emerging markets. But developed market exchanges have changed dramatically. Whereas the New York Stock Exchange and the Nasdaq have dominated the US equity markets for years, there are now 50 venues where US stocks can trade electronically.