The Australian Stock Exchange (ASX) has 2300 entities listed on it,
of which, 220 are ETF’s (Exchange Traded Funds) and a further 80 are LIC’s (Listed Investment Companies).
If we subtract those, we are back now to 2,000 ‘companies’.
Less the 90 companies which are are suspended,
takes us down to 1,910.
Dissecting those remaining 1,910 companies……
767 of them have market capitalisations below $25 million,
a further 256 are trading with a market cap between $25-$50 million,
and another 209 have market caps between $50m – $100m.
That’s a total of 1,230 companies (of the 1,910 left ‘trading’) having market caps of $100 million or less
And 170 companies have market caps between $100m and $200m.
Of that group, we have a total of 1,300 companies with a market cap below $200m.
Arguably, 68% of the companies listed on the ASX hardly matter, and less so to global investors.
Perhaps 40% of the total listed companies, shouldn’t be listed, at all.
Of the 600 companies remaining, 200 companies are trading with market caps between $200 and $686 million.
The 400th largest company has a market cap of $686 million.
The Australian equity market is shrinking and thus “de-equitising”.
The silver lining is…that being a public company allows investors to sift through a company’s particulars freely.
The de-equitisation of the ASX is a positive for the shareholders as feasible investment opportunities are becoming scarce.
It’s not good for the Australian Stock Exchange per se.
Scarcity and tension is also increasing as pension (superannuation) and private equity funds are seeking to deploy more of their ‘idle’ capital.
An added ’squeeze’ is that Australian companies are ‘cheap’ on a U.S. Dollar basis.
With a currency trading at an USD/AUD exchange rate of 0.6400…..buying an Australian business which has a market cap of A$400 million, doesn’t seem to much when you consider the price tag to an American buyer is only US$256 million.
The other ‘bullish’ reference I’ll leave readers with is that in 2003, there were nearly 8,000 securities listed on U.S. equity exchanges.
Today, it’s close to 5,000 securities.
That is the picture of de-equitisation and scarcity.
November 6, 2023
by Rob Zdravevski
rob@karriasset.com.au
rob zdravevski's blog 