Record High in 8 Months... Recovery of COVID-19 Losses
US Stock Market Accounts for 42% of Global Market Cap
[Asia Economy Reporter Jeong Hyunjin] Last month, the global stock market capitalization reached an all-time high. With stock prices rising mainly in the United States and China, the losses from the novel coronavirus disease (COVID-19) have been fully recovered. However, concerns have emerged that the market may be overly optimistic given the speed of recovery compared to economic conditions and corporate earnings.
According to Japan's Nihon Keizai Shimbun on the 2nd, the global market capitalization was recorded at $89 trillion at the end of last month, surpassing the previous record for the first time in eight months since December last year. Although the global market capitalization decreased by nearly $20 trillion during the COVID-19 outbreak from January to March, it has shown a recovery trend due to various monetary and fiscal policies, increasing by more than 30% compared to March.
The U.S. market capitalization was $37 trillion at the end of last month, accounting for 42% of the global total. This is the highest share since the global financial crisis, significantly up from 30% ten years ago. Stock prices of IT companies have been on the rise, and the growth rate of untact companies after COVID-19 has accelerated, with the Nasdaq and S&P 500 indices hitting record highs day after day.
Nihon Keizai reported, "Global investment funds are flowing into the U.S. stock market," adding, "On the 31st of last month, the trading volume of Tesla shares alone was three times that of the entire First Section of the Tokyo Stock Exchange." Apple's market capitalization has also increased by nearly $1 trillion compared to the end of last year.
The Chinese stock market capitalization also grew to about $8.7 trillion at the end of last month, an increase of approximately 40% compared to the end of last year. Accordingly, Nihon Keizai stated that it has surpassed the 2015 level, which was the largest market capitalization scale. Previously, state-owned banks dominated the top market capitalization rankings, but with the increase in IPOs of IT companies, the growth in market capitalization is being driven by these firms.
In Europe and Japan, the recovery of market capitalization has been slower. The UK stock market, which has a high proportion of energy industries and banks, has a market capitalization about 20% lower than at the end of last year, and Germany has not surpassed its January 2018 peak. Japan's market capitalization is also at about $6.1 trillion, a 4% decrease compared to last year.
There are concerns that the rapid pace of market capitalization recovery could lead to a bubble. Expectations for IT companies are high, but there is a divergence between earnings and stock prices. Nihon Keizai reported, "There are worries that if earnings recovery is delayed, stock prices could collapse."
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