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Policy Update: IPOs—The Boom in Emerging Equity Markets

March 31, 2008

Initial public offerings (IPO) worldwide raised a record level of capital in 2007—driven in large part by emerging markets that increasingly list companies on their own exchanges. China remains the undisputed leader, with Indian and Russian stock markets—thanks to “mega” IPOs—returning impressive results. As a whole, equity market capitalization in Latin America is much smaller than in European and Asian emerging markets.

Brazil is Latin America’s unchallenged leader in terms of market dynamism. The BOVESPA, or Brazilian stock exchange, launched 64 IPOs in 2007, including opening its very own capital. Brazilian IPOs generated $29 billion (or 55.5 billion reais), putting Brazil behind only China and the United States in terms of capital raised globally. In 2007, the BOVESPA’s market capitalization grew by more than 90 percent (in U.S. dollar terms)—the sixth largest increase in capitalization worldwide. In comparison, there were over 200 Chinese IPOs last year, and growth in China’s domestic market capitalization (in U.S. dollar terms) fluctuated between 200 percent and 300 percent.

That said, Latin America’s stock...

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Lisa M. Schineller is Director of Sovereign Ratings at Standard & Poor's and an adjunct associate professor at Columbia University.