Study: Passive investors control global stock market

Institutional investors (mutual and pension funds, insurance companies) own shares, which account for 41% of global market capitalization, follows from a new OECD report. In the USA, such structures account for 60% of all investments; they also dominate the markets of Great Britain and Canada. The authors of the study note that funds mainly practice passive index-based investing without analyzing specific companies. This weakens one of the key functions of the stock market – assessing the activities of issuers and providing new companies with capital that would facilitate their growth.

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Study: Passive investors control global stock market © The Strategist

In total, at the end of 2017, there were 41 thousand publicly traded companies in the world; their total value was estimated at $ 84 trillion. The OECD report used data on 10 thousand companies in 54 markets (approximately 90% of global capitalization). The largest market is the US (36% of capitalization), followed by China (12%), Hong Kong, Japan, South Korea, Great Britain.

The second largest category of investors after institutional ones is state structures (14% of capitalization). First of all, these are central and regional governments, then sovereign and pension funds, state-owned companies. In 8% of all companies placed on the markets, at least half of the shares are held by precisely such structures – their total investments amount to $ 10 trillion. At the same time, investments in this sector in China account for 57% of the global capitalization owned by government agencies. The state is an important player in the markets of Saudi Arabia, Malaysia and Norway, where its share ranges from 34% to 46%. The remaining large categories of investors – private corporations (including holdings), strategic individual investors (families) – account for 18% of the total capitalization.

The OECD noted a high concentration of capital as a risk of the global stock market: in half of the companies placed, the three largest shareholders hold more than half of the capital. Cross-border investments account for one fourth of all investments, 75% of this volume is provided by investors from the USA and the EU.

source: oecd.org

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