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Competition for capital will intensify, says NYSE official

Our Correspondent in Hyderabad

James Shapiro, senior managing director, New York Stock Exchange, has predicted that competition for capital would intensify as politically-directed finance and regulatory barriers fall in many countries as part of globalisation.

Shapiro made a presentation on the global perspective on the capital markets in the 21st century in Hyderabad last Saturday. He felt that moving to a capital market model in many countries would force deeper globalisation with the need to attract equity investors from all over the world.

This would also force companies to adopt globally accepted standards of disclosure, regulation and treatment of shareholders.

"Embracing this model will bring many changes to corporate practices. The successful companies will be run for the benefit of shareholders. This involves accountability which improves performance. Shareholders will have an interest in effectively policing companies to ensure that shareholder value is created. This means, corporate governance will be on the agenda," Shapiro said in his brief, lucid presentation.

Asserting that the US equity markets are leading the way in this regard, he said that in fact, the US equity markets were reinventing their business. New entrants in both retail and institutional markets are increasing. They are changing demands of both retail and institutional investors. The stock exchanges are encouraging experimentation at the perimeter and technological changes. This in turn is bringing in low-cost, high-speed computers and communications into the equity markets.

The NYSE senior managing director noted that the capital market model of allocating capital would continue to grow in popularity because of the privatisation, demographic changes, need for efficient allocation of capital as a key to entrepreneurial energy and disillusionment with other means of finance, such as debt and government debt.

He said that the United States today accounted for nearly 70 million shareowners (investors) who constituted 26 per cent of the total population and 37 per cent of the adult population. The number had grown from just around 52 millions in 1989.

Giving an overview of the US equity markets, Shapiro pointed out the significant growth of online trading, which has grown from 22 per cent of all retail trades in the first half of 1998 fiscal to 30 per cent in the second half of 1998 and to 37 per cent in the first half of 1999 fiscal.

There has also been a sharp drop in the average commissions charged by top ten online trading firms, he explained.

He said that the international trading in stocks was bound to go up by leaps and bounds. He also forecast a sharp increase in the US investors trading in non-US stocks abroad as well as in the United States itself.

While the turnover of the US equity markets reached $ 1.8 trillion in 1998, the international trade in stocks reached almost $ 2 trillion, he pointed out.

Business