Is the public market shrinking?

Australia needs a healthy stock market to give companies access to funds and to allow retail investors to build wealth.

- MATTHEW GIBBS

Honey, I shrunk the market!" It could be a movie title. And depending on your perspective, a fact, fantasy or disaster flick.

During my near-two decades in communications at the Australian Securities Exchange (ASX), I was often asked if the public market was 'shrinking'. Meaning: is the number of companies listed on the ASX getting smaller? The only question I was asked more often was "Got any hot tips?"

The answer to both was 'no'. Emphatically 'no' in the case of the latter.

Having majored in hindsight since leaving the exchange, I've reflected on the answer to the former question. Because, to continue the Hollywood theme, "it's complicated". (We're now in rom-com territory.)

Is the public market shrinking? If it is, why is it shrinking and what does that mean for retail investors?

According to ASX data, the total number of listed entities, which includes domestic and foreign companies plus debt issuers, was 2191 at the end of December 2023. A decade earlier, in December 2013, there were 2195 listed entities.

So, yes, the number of listings has shrunk by... 0.18%. If you measure domestic and foreign companies only, the number has gone up by 0.29%.

Has the value shrunk? Comparing the same two points in time, the end-of year value of the S&P/ASX 200 index grew by 41.8%, the All Ordinaries rose 46.3% and the capitalisation for the domestic equity market leapt 72% - from $1.5 trillion at the end of 2013 to more than $2.6 trillion at the close of 2023, an increase of $1.1 trillion.

In a nutshell, there are fewer entities in which to invest (just), but those in which one is invested are worth (considerably) more.

I know, I know: lies, damned lies and statistics. You can pick stats to suit any argument. Trading volumes and capital raisings might tell a different story. Or they might not.