Report on Developing Emerging Capital Markets
The IOSCO Growth and Emerging Markets Committee (GEMC) published a report examining the challenges and opportunities that Emerging Markets jurisdictions (EMs) face when developing their capital markets as key drivers of economic growth and financial resilience and inclusion. The report makes five key recommendations that EMs should consider when seeking to strengthen their capital markets.
The report, Development of Emerging Capital Markets: Opportunities, Challenges and Solutions, draws on the GEMC´s extensive work on different aspects of market development, from corporate governance and regulatory frameworks to corporate bond markets and market liquidity. It also highlights the main challenges faced by EMs in implementing international standards and the role of capacity building. In addition to these areas, the report explores further opportunities offered by sustainable finance and FinTech for developing EMs.
The report also analyses the preliminary impact of COVID-19 on EMs focusing on the capital outflows and the operational resilience of these markets during the pandemic. Its analysis highlights the need for capital markets to function efficiently during the current crisis to support the real economy.
While recognizing there is ‘no one size fits all’ approach to capital markets development, the report sets forth five key recommendations to assist EMs in deepening their capital markets:
• Recommendation 1: Policy makers and regulators should develop a holistic strategy for the development of capital markets.
• Recommendation 2: Regulators should seek to ensure that capital markets are fair and efficient for capital raising. Increasing institutional investor participation, providing diversified investment choices and ensuring market confidence should be high priorities on their agenda.
• Recommendation 3: Securities regulators should have adequate powers, proper resources and the capacity to perform their functions and exercise their powers.
• Recommendation 4: Jurisdictions should establish strong national and international cooperation arrangements to develop capital markets with the key involvement of the securities regulator.
• Recommendation 5: Regulators and market participants should develop and implement efficient roadmaps for investor education and guidance.