(Finance) – European markets continue to be characterized by structurally smaller dimensions than the US market in terms of capitalization, while both jurisdictions also experience a contraction in stock markets with the number of listed companies have been decreasing for several years now. CONSOB explains this in the market overview contained in the explanatory programmatic report of the budget forecast for the 2025 financial year.
The delisting phenomenon also affects Italy where, in the first nine months of 2024, the number of companies listed on Euronext Milan (EXM) decreased by 9 units. According to CONSOB, the progressive contraction of stock markets, particularly marked in Europe, confirms the importance of intensifying the commitment aimed at fully implementing the actions outlined in the plan for the Capital Markets Union (CMU) to encourage greater development of markets in the EU.
To this end, a crucial factor is represented by participation of institutional investors to stock markets, which in Europe is significantly lower than in the United States: in November 2024, the market capitalization of the top 100 US companies attributable to institutional investors was approximately 74%, compared to 42% attributable to the top 100 companies Europeans.
Also the sector of private equity and of venture capital is less developed in Europe than in the USA. Based on the latest available data, in the first nine months of 2024, private equity investments in the United States stood at around $650 billion, compared to $413 billion in Europe. Transactions relating to Italy represented almost a third of the value of European transactions. “Private equity and venture capital investments are an important source of financing for both mature and more innovative companies and can play a complementary role to that of public capital markets,” it is underlined.
The gap between the United States and Europe is also confirmed with respect to participation of retail investors to the capital market. The figure relating to the ratio between capital market instruments and total financial assets held by households, as of June 2024, is higher in the United States (70%) than in the euro area (54%).
“If, as mentioned, a developed, efficient capital market of adequate size and with good growth prospects constitutes a cornerstone of the investor protection system, it is also of fundamental importance for the financing of the real economy, especially in The current economic situation characterized by less favorable financial conditions than in the past – underlines the Authority – Promoting a structural change in the structure of financing sources for the real economy remains one of the main challenges for the Eurozone. Through greater diversification in sources of financing it is possible to guarantee the resilience of the financial system and support growth in the competitiveness of businesses in an increasingly complex global context”.
Alongside this objective, there remains growing attention to the issues of sustainability and innovation. As for the first theme, actions aimed at developing an information ecosystem on performance and ESG risks are a priority for the purposes of protecting investors. Such conduct green or social washing they represent, in fact, significant riskswhich can undermine the development of sustainable finance as they lead to a loss of confidence in products classified as ESG, as well as the market’s inability to correctly price these instruments, preventing resources from flowing to truly worthy activities or projects.
As for the second theme, the spread of new technologies, alongside benefits in terms of efficiency and productivity, poses risks related to the safety of public and private infrastructures, which require adequate monitoring. Similarly, the development of the cryptoassets represents a phenomenon that requires attention for the purposes of investor protection. Although the size of the sector is still rather small, the growing interest of investors in this type of activity, also connected to the progressive diffusion of investment products such as ETFs on Bitcoin and Ether, could increase interconnections with the traditional financial system and thus pose risks to financial stability, in light of the extreme volatility that characterizes these activities