Macroscope | Corporate Asia can no longer raid global stock markets for cheap and easy capital, just when they need it most

For businesses in Asia and elsewhere, financial survival has become the immediate priority as domestic credit gets squeezed and foreign-currency credit lines contract. But the stock market crash poses another, and less widely appreciated, threat to Asian firms’ profitability, or even viability.

This arises from corporate Asia’s growing dependence on raising capital in local and international equity markets. Investors in the United States and Europe are now selling Asian and other emerging-market stocks, and could also withhold funds from new listings and other forms of capital raising in Asia.

As the Organisation for Economic Cooperation and Development noted last November: “Asia is rapidly growing into the world’s largest stock market ... Today, more than half of the world’s listed companies are from Asia.”

The cost of equity capital is set to rise as a result of the stock market crash when other forms of financing are coming under pressure. According to a Institute of International Finance report earlier this month, “concerns about solvency and default risk have decimated investor appetite for corporate bonds”.