Covid Crisis Demonstrates Importance of a Functioning Capital Market

Source: Bloomberg
Source: Bloomberg

The recent Covid crisis has demonstrated the importance of a properly functioning capital market during times of crisis and uncertainty. Data compiled by Bloomberg (see chart) shows how global equity funding, excluding Initial Public Offerings (IPOs), has jumped during the period following the onset of the Covid-19 pandemic. Globally, such equity issuance jumped from USD119.5bn in Q2, 2019 to USD302.4bn in Q2 2020. For companies badly affected from the current pandemic, access to equity finance has been an important lifeline.

This lifeline of equity issuance is difficult for Czech companies to access. During 2020, the only significant issue of equity in the Czech Republic being that of Ceska Zbrojovka. Despite one of Europe's highest savings rates, investors have traditionally shunned the Czech capital market preferring investment into property or bank deposits. What equity investment there has been has been directed mostly to foreign markets through investment companies registered outside the Czech Republic. The Czech Republic's poor record in investor protection is the main reason for this reluctance to invest in the domestic market.

Jeremy Monk
AKRO investiční společnost, a.s.