Global stock markets faced a challenging year in 2022, with the World Federation of Exchanges (WFE) reporting that $25trillion was wiped off markets worldwide.
The WFE’s FY 2022 Market Highlights report revealed that stock markets experienced a 20 per cent decline in market capitalisation and a 10 per cent decline in value traded, interrupting the positive trend of the previous two years.
The report highlights factors such as inflation, the Ukraine war, and China’s Covid lockdown as key contributors to the slump.
Inflationary trends caused by strong consumer demand and supply bottlenecks, exacerbated by the Ukraine war and sanctions against Russia, increased energy prices, especially for European countries. Additionally, China’s stringent Covid lockdown strained the global supply chain, driving up prices of imported goods.
As a result of the high inflation environment, investment cooled down in the equity market, alongside the tightening of monetary policies that included raising interest rates across most economies.
Nandini Sukumar, CEO at the WFE, said: “We witnessed a perfect storm in 2022 of so many negative pressures culminating to bring immense pressure on global stock markets, as our report highlights.”
While the stock market experienced a significant slump, the report also revealed some good news. Volumes of exchange-traded derivatives continued a positive trend, with the exception of commodity derivatives. Options, in particular, experienced a pronounced increase, possibly due to a greater need to hedge against market uncertainty.
The number of exchange-traded derivatives contracts, including both options and futures, reached their highest level in the last six years, amounting to 56.17 billion for options and 29.59 billion for futures (84.76 billion derivatives contracts traded). This represents a 34.4 per cent increase compared to 2021.
The report also provides some specific highlights on various products, including the decline of IPOs and capital raised through IPOs, the increase in interest rate derivatives volumes, and the decline in listed securitised derivatives’ value traded.
Established in 1961, the WFE is the global industry association for exchanges and clearing houses.