HONG KONG, 1 September 2003 — The next two years are expected to prove critical to the long-term success of the world’s 44 new stock markets, many of which are struggling to attract new listings to maintain current market capitalization, a report said yesterday.

The Global New Markets Guide, produced by the business advisory firm Grant Thornton, found that only 11 of the 44 new markets had been in operation for more than a year with at least 30 companies listed.

Among the 11, only US’ NASDAQ, UK’s Alternative Investment Market (AIM), South Korea’s Kosdaq and Canada’s TSX-V succeeded in creating substantial markets, said Stephen Weatherseed, a partner at Grant Thornton.

Hong Kong’s secondary Growth Enterprise Market (GEM), Kosdaq and AIM were the most successful in attracting new listings in 2002. Total listed firms on GEM rose by 61, or 75 percent, to 166 last year, while Kosdaq registered 167 new firms lifting the total to 843. AIM added 66 new firms with 704.

The world’s New Markets are broadly defined as those which appeal to younger, high-growth companies that were once the toast of the investment community but have performed poorly since the peaking of the global economy in April 2000 and the bursting of the Internet bubble in the same year.

“GEM, together with Japan’s Mother’s Market, UK’s OFEX and Singapore’s Sesdaq have produced encouraging results but still need to prove their long-term worth, whilst for others, the next two years will be critical to their long-term future,” Weatherseed said.

Although Hong Kong’s GEM market had shown encouraging results in attracting new listings and maintaining a steadily increasing market capitalization, it still lagged behind the Kosdaq and new market leader, the NASDAQ in the United States, he said. The NASDAQ has 3,765 listed firms with market capitalization of almost two trillion US dollars. TKosdaq 843 firms have capitalization of $34.65 billion while the GEM’s 166 firms have total capitalization of just $6.7 billion.

However, Weatherseed noted that one positive effect of the prolonged economic downturn was to shake out the winners and losers in the New Markets. He said that those which had succeeded typically represented a broad portfolio of sectors, including services, resources and industrials, and had moved away from their previously narrow focus on technology stocks. “On the other hand, some have no companies listed on their exchanges while others have been totally unable to raise any funding.

“A large number are failing to attract new companies in order to achieve any critical mass while others have shown worrying signs of a reduction in the average number of companies listed,” Weatherseed said.

He pointed to Germany’s Neuer Markt, which achieved just one initial public offering (IPO) in 2002 compared to 133 two years earlier — a performance which contributed to its closure.

“Overall we are likely to see a further shake out as the next two years are likely to be a defining time for the long-term endurance of New Markets,” he added.