Asia’s Public Equity Markets: The SOE Factor

State-owned enterprises (SOEs) have long played a pivotal role in shaping the economic landscape of many emerging markets. They are often among the largest employers, major providers of essential public goods and services, and the driving force behind large-scale infrastructure projects. From energy and utilities to financial services, SOEs operate in sectors critical to ensuring downstream competitiveness.

However, the traditional image of SOEs in emerging markets has not always been flattering. Many struggle with inefficiencies, weak economic performance and sometimes a lack of professionalised governance due to undue political interference. SOEs growing role in the global marketplace has also given rise to concerns about a level playing field. This is not surprising, given their proximity to the state and broad mandates: delivering vital public services that might not attract private investment, while balancing commercial, social and other policy objectives.

Recently, however, a transformation has been unfolding across Asia and other regions. Governments have increasingly turned to public equity markets as a tool to reform and revitalise SOEs. By listing state-owned companies on stock exchanges, governments improve market discipline and transparency, compelling SOEs to adhere to stricter disclosure standards, improve governance and sharpen their focus on performance.

The fiscal benefits are significant too. Initial public offerings (IPOs) of SOEs can generate large revenues, freeing up government budgets to invest in priority areas like infrastructure, education and healthcare. When done under the right conditions, underpinned by strong governance frameworks, independent supervision and enforcement recognising the rights of all shareholders, these listings expand the investable universe, adding depth and liquidity to domestic capital markets.

Asian economies have demonstrated how strategically listing SOEs can fuel capital market development. The People’s Republic of China (“China”) is perhaps the most striking example. The Shanghai and Shenzhen stock exchanges were initially established as part of broad SOE reforms. IPOs - such as the 2006 listing of a major state-owned bank - have triggered dramatic increases in market capitalisation, in some cases nearly tripling the size of the equity market overnight.

Other countries have followed similar paths. Viet Nam’s “equitisation” programme relied on SOE listings to spark the development of its capital markets. Today, 70% of listed SOEs worldwide trade on Asian exchanges, and SOEs represent 26% of Asia’s total market capitalisation, far above the 5% seen in other regions. In markets like China, Malaysia, Singapore and Viet Nam, SOEs account for over a third of market capitalisation. Moreover, in nearly half of Asian economies, the three largest listed SOEs alone represent more than 10% of total domestic market capitalisation. Singapore’s top three SOEs, for example, make up nearly a third of its entire market.

The benefits of listing go beyond market size. Once listed, SOEs often ramp up investment, tapping public markets for additional capital. Data on Asia’s top non-financial SOEs shows higher investment levels in industrial, technology and utilities sectors during and after IPOs. These fresh funds often go into strategic projects, innovation and modernisation.

However, the impact depends heavily on the surrounding ecosystem. A deep, diverse investor base, robust market infrastructure, effective regulation and enforcement, and economic stability are all essential to ensure that listings deliver genuine value. Poorly prepared privatisations or weak governance frameworks risk undermining public and investor trust and fuelling perceptions that state assets are sold below value for the benefit of a few.

Moreover, while IPOs can strengthen markets, they can also expose weaknesses if governance frameworks and fair market conditions are not solid. Political interference post-listing, inadequate minority shareholder protections, ineffective regulation and insufficient disclosures can hinder the long-term benefits arising from better governance and performance of SOEs as an ongoing source of government revenue.

The influence of Asian SOEs extends beyond domestic borders. They make up a sizeable share of the MSCI Emerging Markets Index - about 13%. In strategic sectors like finance, energy and utilities, SOEs represent the lion’s share of the index. This makes them highly relevant for global institutional investors, who often hold larger stakes in index-included SOEs than in their non-index peers. These investors increasingly expect higher standards of governance, disclosure and accountability, and requisite investor protections. When grounded in global best practice standards listing can serve as a catalyst for continued reforms that enhance investor confidence.

Interestingly, while SOEs’ share of IPO fundraising has fallen from 33% in the early 2000s to 15% in recent years, they remain active in capital markets through follow-on offerings. Between 2016 and 2024, SOEs accounted for nearly a quarter of total capital raised through secondary offerings in Asia. This pattern highlights that listing is not the end of the journey - rather, it opens the door to sustained engagement with equity markets to fund future growth and innovation.

For emerging markets seeking to deepen their capital markets, SOEs remain a powerful lever. When governance frameworks are robust and market conditions are right, listing SOEs can unlock capital, boost competition, efficiency and transparency, and create broader benefits for the economy and society alike. The OECD Guidelines on Corporate Governance of State-Owned Enterprises can help build and strengthen such frameworks.

As Asia’s experience shows, public equity markets are not just a place for private firms to raise capital, they can also serve as a launchpad for modernising some of the region’s most important economic actors. For policy makers, investors and citizens, ensuring that this tool is used wisely could help build more resilient, competitive and inclusive economies for years to come.

To find out more, read the OECD Asia Capital Markets Report 2025.