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More than $12 trillion flows into world’s 10 largest stock exchanges in H1 2021

More than $12 trillion flow into world's 10 largest stock exchanges in H1 2021

After recording historical dips over the past year, the stock market is building momentum attracting more investors. Therefore, in the first half of 2021 leading global exchanges have witnessed their market capitalization grow by trillions of dollars.

According to data compiled by Finbold, the top ten largest stock exchanges globally cumulatively grew by 15.43% or $12.12 trillion in market capitalization between January and June 2021. The total market cap stood at $78.54 trillion at the start of the year, surging to $90.66 trillion by the end of 2021’s first half. 

American-based exchanges remained dominant, with the New York Stock Exchange holding the pole position. Between the period under review, the exchange market cap surged from $21.36 trillion to $25.30 trillion. Nasdaq-US ranked second, with the market cap growing 14.32% to $22.11 trillion. Elsewhere, between January and June, Euronext had the highest growth rate at 32.17%, from $4.88 trillion to 6.45 trillion. The data on stock market capitalization is provided by the World Federation of Exchanges

Drivers for market cap growth 

The increase in market capitalization represents a general market enthusiasm recorded during the first half of the year, building from last year’s gains. The wave has seen investors’ putting more cash into stock-based funds. Notably, the inflows of capital have been broad, entailing a significant addition to both global funds. Over the period, most investors have increasingly preferred both growth and technology stocks, especially from the U.S. 

In general, the inflow into the stock exchanges highlights the recovering economy due to the rollout of the coronavirus vaccines. The vaccination has been wide scale in most developed markets that host the exchanges. Sectors like air travel and energy that were crippled by the pandemic are also recovering, joining tech stocks that have mostly retained historical highs since last year. 

Besides the solid economic growth, the stock market has continued to receive support from high corporate confidence levels and an extended great monetary and fiscal stimulus. Furthermore, a low-interest-rate environment often drives investors to higher-risk investments like stocks. 

During the first half of the year, the global stock market also recorded wild swings powered by an influx of retail investors. To venture into the market, this class of investors banked on the meme stock trading trends like GameStop and AMC Entertainment Holdings. The social media-fuelled campaigns led to the stock recording record profits with most investors aiming to capitalize on the gains. Worth mentioning is that retail investors also had more options to venture into the stock market through platforms like Robinhood or Revolut

Why U.S. exchanges are dominating 

Although the exchanges are spread across the globe, the United States still dominates the international equity scene. The market hosts some of the companies with trillion-dollar valuations like Apple and Amazon. Notably, the stocks for these companies are projected to keep soaring hence continue to attract more inflows from investors. 

Our previous research showed that these companies elevated the United States to control more than half of the relative size of the global stock market at 55.9% as of January 2021. 

For instance, the status of NYSE is highlighted by our other report that showed that the exchange’s $25.62 trillion market capitalization was higher than the United States GDP of $21.67 trillion as of April 2021.

The U.S. stock market position is potentially due to the continued influx of investors as they carry a sense of legitimacy. In return, the market offers access to the best capital and financing for companies that trade there. The market also has attracted most foreign companies. Additionally, trading on American exchanges puts investor concerns at bay due to the country’s strict regulatory environment. 

The U.S. position in the equity market stands out considering that the country’s stock exchange remained top despite grappling with the pandemic for a long time. In comparison, China, which resumed economic activities earlier, saw its exchanges trail the U.S.

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