Asian Capital Markets: From rapid expansion to sustainable value creation

The geography of global public equity markets has changed dramatically over the past 25 years. Today more than 51 000 companies are listed worldwide - 25% more than at the turn of the century. Yet this global increase masks striking regional divergences. While the United States and Europe have experienced a sustained decline in the number of listed companies, Asia has become home to more than half of the world’s listed companies and accounts for almost one-third of global equity market capitalisation. 

In advanced markets outside Asia, weak IPO activity, persistent delistings, the expansion of private capital, mergers and acquisitions, and the rising costs of being publicly listed have all contributed to a shrinking public equity landscape.

Asia has followed a different trajectory. Between 2000 and 2025, the region added more than 14 000 listed companies and today hosts over 28 000 companies with a combined market capitalisation of USD 43 trillion. Over the same period, Asian companies accounted for the largest increase in global corporate bond markets, adding around USD 9.3 trillion in outstanding debt. These developments have supported new business creation, corporate investment and the emergence of globally competitive companies.

Asia’s untapped potential

Despite this remarkable expansion, Asia’s capital markets have not yet reached their full potential. The OECD’s Asia Capital Markets Report 2026 highlights an important paradox. While the region continues to generate strong economic growth and highly innovative firms, several segments of its capital markets remain underdeveloped in comparison with its share of global GDP (31%). For example, it accounts for only 20% of global private equity assets and just 4% of global private credit. These figures also mask large disparities in size and maturity across Asian markets.

Bank lending continues to dominate corporate financing. Bank credit represents 98% of GDP in Asia, compared with 71% globally (OECD, 2025). While several economies have developed deep capital markets, many companies still depend overwhelmingly on bank financing. The challenge is even greater in developing economies where neither banks nor capital markets provide sufficient financing, leaving many businesses constrained in their ability to invest and grow.

Turning capital into innovation

By providing corporations with long-term risk-willing capital, well-functioning capital markets are a major enabler of innovation. Asian economies with more developed market-based financing systems consistently enjoy higher innovation performance than those that rely primarily on bank credit. 

Going public also enables companies to increase their investments. In the technology sector, for example, investment rises from 7.5% to 11.4% of sales between the year before the IPO and the year after. This illustrates clearly how public markets help companies scale up investment, accelerate innovation and support long-term growth.

What is preventing Asian capital markets from reaching their full potential? 

One of the defining characteristics of many Asian equity markets is the relatively limited role of institutional investors. Globally, institutional investors own almost half of listed equity market capitalisation. In Asia, that share is only 19%, while governments, corporations and strategic shareholders hold significantly larger stakes than in most developed markets. Listed state-owned enterprises alone account for 25% of Asia’s market capitalisation, compared with only 5% in the rest of the world.

Institutional investor participation also varies considerably across the region, from 34% of market capitalisation in Japan to just 1% in Bangladesh. This reflects both a relatively small domestic institutional investor base and limited representation in global equity indices that constrain foreign participation. Although Asia generates nearly one-third of global GDP, it accounts for only 10% of global pension fund assets, 22% of investment fund assets, and 27% of insurance assets. Moreover, only a few markets are significantly represented in global investable indices. Asia’s share in the MSCI World Index is well below its share of global GDP at only 6%, and despite being well represented in the MSCI Emerging Market Index, only 5 markets have significant weights: China, Hong Kong (China), Korea, India and Chinese Taipei. 

A narrow investor base has important consequences. It reduces liquidity, weakens price discovery, limits shareholder engagement and can make markets less resilient during periods of volatility. Expanding both domestic and international institutional investor participation should therefore remain a policy priority.

But perhaps the most striking feature of many Asian equity markets is the valuation discounts. By the end of 2025, around 40% of listed non-financial companies in Asia (excluding China and Japan) traded below book value. While low valuations partly reflect firm-level factors such as weak profitability and returns below the cost of capital, market structure also plays an important role.

Markets with more concentrated ownership generally have a larger share of companies trading below book value. High ownership concentration reduces free float, limits liquidity and discourages broader investor participation.

Not surprisingly, OECD survey evidence also shows that institutional investors primarily engage with companies on financial performance, business strategy and capital allocation (OECD, 2026). However, investors argue that they continue to face barriers, including complex ownership structures, limited corporate disclosure, difficulties accessing decision-makers, and cultural and language differences.

Addressing persistent valuation discounts therefore requires more than improving corporate profitability. It also requires stronger corporate governance, greater transparency, more effective capital allocation, and stewardship frameworks that encourage meaningful dialogue between investors and companies. Together, these reforms can strengthen investor confidence and support better long-term market performance.

The next phase of Asia’s capital markets development

Asia’s capital markets have become a major pillar of the global financial system. The next phase of development, however, will depend less on increasing the number of listed companies and more on improving market trust and quality.

Broadening financing options beyond banks, expanding the institutional investor base, strengthening corporate governance and improving market valuations will be essential to unlocking the region’s full potential.

Asia has demonstrated its ability to build larger capital markets. The challenge now is to build better capital markets that allocate capital efficiently, support innovation and create long-term value for companies, investors and the broader economy.

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Alejandra Medina (PhD) is the Head of the Financial Economics Unit at the OECD.

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This blog is based on a discussion which took place at The Future of Capital Markets: Global and Asian Perspectives, a conference jointly organised by Singapore Management University, the OECD and ECGI. Visit the event page to explore more conference-related blogs.

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