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February 06, 2014

New York Stock Exchange Lures Foreign Capital

by Bernard Shusman

The New York Stock Exchange is turning to foreign markets for capital and growth.

The exchange has been at the heart of the American financial system for over 200 years.  It once had a monopoly on the trading of shares in firms listed on it, but regulators did away with that in 2000.

But with the stiff competition, it has turned to foreign markets for expansion in the form of Initial Public Offerings of stock, called IPO’s.
 
The IPO process allows companies to raise money and gives investors a chance to buy part ownership of the company, and benefit from the firm’s possible future profits.

David A. Ethridge, senior vice president and head of the Capital Markets Group at NYSE Euronext, said the Exchange “has been able to steadily perform and allow companies to come public in a very, very programmed style that is really terrific about the U.S. capital markets because we are disclosure based.”

“They [companies] know if they come here and start a process with the Securities and Exchange Commission (SEC), we have a window with investors they can get public,” he said.

Ethridge said the Exchange is continuing to see a lot of investment money flow from around the world.

The Exchange had 10 IPO’s in January that raised $4.7 billion dollars in capital -   continuing what Ethridge says is the leading international role in raising IPO capital.

“For a couple of years China was putting out a lot of IPO capital in their local markets of Shanghai, Shenzhen and then Hong Kong as well,” he said. “So when you looked at those three destinations they were actually leading the IPO market in aggregate versus the United States.”

Ethridge predicts continued growth in IPO’s.

“Right now I think companies are doing well,” he said. “I think when you are looking at them and their performance year over year that looks strong, and, I think, that’s going to be good for the capital markets and IPO markets near term.”  

For now, traders and analysts say the world economy is responsible for the markets recent pullback. The market is undergoing a long awaited correction, said Ben Willis, managing director of the Albert Fried Company at the Exchange.  

"The trigger seems to be the central banks throughout the world readjusting their stimulus packages that have devalued their currencies,” he said.  “We are now seeing currencies revalued and that’s having a direct impact on stocks."

Willis advises investors not to worry.  He said the market correction is healthy.

“It’s like a rose bush,” he said.  “While you don’t really want to prune it, you need to keep it healthy if you want to continue to benefit from that rose bush.  And, that’s all the stock market is doing.”