This article appeared in the May 2010 Listed @ ASX newsletter.

How did the market perform in the first quarter of 2010?

It has been just over a year since the 3,120 intra-day low in the S&P/ASX 200, which was reached on 10 March 2009.

The benchmark index is currently around the 5,000 level, a 60% rise off the low, which is one of the strongest recoveries on record. The market capitalisation of ASX listed companies has now risen to over $1.5 trillion, still short of its peak of $1.75 trillion in 2007.

In recent months the market has largely been trading sideways with investors weighing up improved economic indicators and trading conditions against foreign sovereign debt and monetary policy concerns. Notwithstanding the macro issues, volatility has declined to the moderate levels seen prior to the GFC while trading activity has remained robust. Around 500,000 trades with a value of about $5.5 billion is being executed daily on the ITS trading system.

Index Level and Realised Volatility

Equity Capital Markets

There were 14 Initial Public Offerings (IPOs) in Q1 2010. Despite market conditions being generally favourable for IPOs, there was only one large cap listing (excluding schemes and restructures). Most issues were in the mineral exploration sector. The largest IPO was Miclyn Express Offshore, which had a market capitalisation of $516 million upon listing.

After a record year of secondary capital raising on ASX in 2009, equity capital markets have seen a more subdued start to 2010. A modest $5.5 billion in secondary raisings took place in Q1 2010 compared to $24 billion in Q4 2009. Some of the slowdown in activity can be attributed to seasonal factors, but other signs point to a slowdown in the corporate de-leveraging cycle.

With Australian corporate balance sheets stronger, many commentators have predicted that capital market activity would focus on M&A in 2010. These predictions have been borne out by a recent surge in M&A activity, particularly in the resources sector. Since December 2009 company boards have had to evaluate a large number of M&A proposals valued in total at over $23 billion.  

Monthly value of equity issues

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