The role of equity in financing business is set to make a major resurgence, Stephane Boujnah, CEO of Euronext, told the TradeTech audience this morning.
In an opening speech at the conference, Boujnah said debt financing is increasingly available to only a handful of companies, which will bode well for the health of equity markets in the future.
“We strongly believe equity is back,” he told delegates, “Lending is cheap for a very few, but the majority have no access to debt finance and this means more companies will look to the equity markets in the future.”
He added that this comes at a time when investors are also struggling to make a good return on their capital. He added that the risk reward profile for equities compares very favourably to other asset classes at present, which should bring increased liquidity to the markets.
Boujnah also said financial market participants have underestimated the possibility of Brexit and its impact on their business.
“If the UK votes to leave the EU it would the most significant historical event in Europe since the fall of the Berlin Wall in 1989. It will have a huge affect on the whole of Europe and we all need to think about how it will affect us,” he explained.
Boujnah’s speech was followed by Kevin Cronin, global head of trading at Invesco, who was critical of the role regulation has played in the fixed income market.
“The changes we’ve seen in equity markets have been driven three parts by competition and one part by regulation, and those markets have become massively more efficient as a result,” he explained.
“But what we’re seeing in fixed income is being mostly driven by regulation, yet some parts of the fixed income market do not lend themselves well to the agency model or to electronic markets and this is harming those markets.”
Cronin also welcomed the move towards unbundling of research and execution commissions in Europe, saying it “removes a historic friction between fund managers’ need for information and the traders’ best execution goals.”