This chapter describes the vital role capital markets play in enhancing economic competitiveness by financing new businesses, supporting the growth of established firms and fostering emerging industries. In many Asian economies, however, underdeveloped capital markets constrain access to diverse funding sources, leading to a heavy reliance on bank financing. While smaller firms are most affected, even large companies in developing markets often struggle to raise capital efficiently due to limited market depth, low institutional investor participation and regulatory hurdles. Although alternative financing options such as private equity, private debt and venture capital are expanding, they remain concentrated in a handful of markets.
Asia Capital Markets Report 2025
Abstract
Over the past two decades, capital market activity in Asia has grown substantially
Over the past two decades, many Asian economies have implemented comprehensive reforms to strengthen their financial systems and promote market-based financing. As a result, Asia has achieved robust growth in its number of listed companies, market capitalisation and corporate bond issuance, highlighting the growing role of capital markets in supporting regional economic growth and the region’s growing role in global capital markets (Figure 1.1).
Between 2000 and 2024, Asia experienced the largest increase in the number of listed companies of all regions, with an increase of over 14 300 companies. During the same period, that number decreased in both the United States and Europe, with Europe losing 1 055 companies and the United States losing 2 243 (Figure 1.1, Panel A). The trend in Asia reflects the increasing role of market-based financing in the region, where businesses are increasingly using public equity markets, including in emerging markets and developing economies. Asia also experienced a significant increase in market capitalisation, adding USD 25 trillion. In comparison, Europe saw no significant change. The United States, despite losing companies from its stock exchanges, added USD 35 trillion to its market capitalisation (Panel B). Asia’s corporate bond market also increased significantly. The outstanding amount of corporate bonds grew more quickly than in the United States and Europe, with an increase of USD 8.8 trillion, compared to USD 5.1 trillion in the United States and USD 4.5 trillion in Europe (Panel C).
Capital market activity in Asia has grown substantially
Note: Investment funds, unit trusts and companies whose only business goal is to hold shares of other listed companies, such as holding companies and investment companies, regardless of their legal status, are excluded.
Source: World Bank (2024[1]), Listed domestic companies - Data, https://data.worldbank.org/indicator/CM.MKT.LDOM.NO; OECD Capital Market Series dataset; see Annex for details.
However, in many Asian countries, non-financial companies still rely heavily on bank financing
Despite the growing role of market-based financing in the region, corporate financing in much of Asia remains predominantly bank‑based, with a higher share of credit relative to GDP compared to the global figure. Several economies, such as Cambodia and Viet Nam, have very high credit-to-GDP ratios and low use of market-based financing (Figure 1.2). Others such as Japan, Korea, Malaysia and Thailand have more market-oriented corporate financing structures. The biggest concern lies with countries where neither credit- nor market-based financing has developed sufficiently to support economic growth and many businesses are likely to be financially constrained. This is the case of most developing economies in the region.
In many Asian countries, non-financial companies still rely heavily on bank financing
Note: Credit data for Bangladesh, Cambodia, Mongolia, Pakistan and Philippines come from the World Bank database “Domestic credit to private sector by banks (% of GDP)”. It includes loans, purchases of non-equity securities, and trade credits and other accounts receivable, that establish a claim for repayment. For Sri Lanka, Chinese Taipei and Viet Nam credit data refers to bank loans and comes from local sources. Other Asian economies and global credit figures come from BIS. The data used includes bank loans to non-financial corporations (defined as total credit outstanding to non-financial companies less the outstanding amount of non-financial corporate bonds). Hong Kong (China) and Chinese Taipei are not shown in the figure, as both exceed the axis range. For Sri Lanka credit to GDP corresponds to 2021. “Global” in the figure refers to all countries included in the BIS data, as well as the Asian jurisdictions featured in this figure.
Source: OECD Capital Market Series dataset; World Bank (2025[2]), Domestic credit to private sector by banks (% of GDP) – Data, https://data.worldbank.org/indicator/FD.AST.PRVT.GD.ZS; BIS (2025[3]), Credit to the non-financial corporations - Data, https://data.bis.org/topics/TOTAL_CREDIT/data; The State Bank of Vietnam (2024[4]), Credit to the Economy; LAOSIS (2024[5]), Financial position of commercial banks; CBSL (2022[6]), Financial Sector Statistical Tables, https://www.cbsl.gov.lk/en/statistics/statistical-tables/financial-sector; Central Bank of the Republic of China (Taiwan) (2024[7]), Financial Soundness Indicators, https://www.cbc.gov.tw/en/cp-486-862-AE8D1-2.html; Federal Reserve Board (2025[8]), Financial Accounts of the United States, https://www.federalreserve.gov/releases/z1/20250313/z1.pdf; IMF (2024[9]), World Economic Outlook (October 2024), https://www.imf.org/external/datamapper/NGDPD@WEO/OEMDC/ADVEC/WEOWORLD; see Annex for more details.
Many Asian companies face financial constraints, limiting their ability to invest and grow
In many Asian economies, both the banking system and capital markets remain underdeveloped and are unable to fully meet the financing needs of businesses. Consequently, a significant share of companies faces financial constraints. Limited access to finance often compels them to reduce or postpone key investments in areas such as innovation, infrastructure and talent development - critical factors for long‑term competitiveness. In turn, financially constrained companies tend to experience slower growth, lower productivity and weaker competitiveness.
Smaller companies in emerging markets and developing economies (EMDEs) tend to be more affected by financial constraints (Figure 1.3, Panel A). In China, Malaysia, the Philippines and Viet Nam, companies that face financial constraints experience slower sales growth compared to their non-financially constrained counterparts (Panel B).
Smaller companies are more likely to identify access to finance as a significant barrier, and financially constrained firms typically experience slower sales growth
Note: In Panel A, share of companies refer to companies refer to those identified by the World Bank Enterprise Survey as reporting access to finance as a major or very severe constraint. Information refers to end of 2022 and 2023, in a few cases the latest available information is used. In Panel B, financially constrained firms are defined as those without any debt for three consecutive years between 2016 and 2018. The chosen period is before COVID-19 to avoid considering temporal effects related to it. Sales growth refers to the year-on-year change implied by the cumulative growth over a three-year period. Data coverage limitations restrict the jurisdictions presented in Panel B.
Source: World Bank (2025[10]), Enterprise Surveys, www.enterprisesurveys.org; ORBIS-OECD Corporate Finance Dataset; see Annex for details.
SMEs in Asian emerging markets and developing economies lack adequate financing
For small and medium-sized enterprises (SMEs) in Asian emerging markets and developing economies, bank loans remain the main source of external financing. However, access is often restricted due to insufficient collateral and banks’ perception of these businesses as high-risk, largely because of their uncertain outlook. SMEs also face challenges in accessing capital markets due to high issuance costs, strict listing requirements and negative investor risk perceptions. As a result, 70% of micro, small and medium enterprises (MSMEs) in emerging markets globally lack adequate financing (IFC, 2024[11]). This is particularly evident across Asia where banks tend to be risk-averse and lending to SMEs is limited (Figure 1.4, Panel A). Moreover, in two-thirds of the markets analysed in this report, more than 70% of loans require collateral, posing a significant barrier for companies seeking to innovate (Panel B). China, where banks allocate 65% of their loans to MSMEs, is an exception.
Alternative financing mechanisms, such as private equity and private credit, are expanding but remain small and highly concentrated in a few markets - China, Korea, Japan and India (see chapters 2 and 3). In China, for example, venture capital assets have grown significantly, reaching 5% of GDP by June 2024, and surpassing levels in both North America and Europe.
Bank loans to SMEs remain limited in many emerging Asian markets
Note: In Panel B the information refers to 2023 or latest available information.
Source: ADB (2024[12]), Asia Small and Medium-Sized Enterprise Monitor 2024, www.adb.org/sites/default/files/publication/1011576/asia-sme-monitor-2024.pdf; World Bank (2025[10]), Enterprise Surveys, www.enterprisesurveys.org
Developing capital markets will support Asia’s long-term competitiveness
Capital markets have the ability to finance innovation which in turn drives competitiveness. Developing and commercialising new technologies requires substantial upfront investment, which is often beyond the scope of traditional bank lending due to the high-risk and long-term nature of such projects. By contrast, capital markets can mobilise large-scale funding from a broad and diverse investor base, making them particularly well-suited to support ambitious, innovation-driven ventures. They also provide the risk-willing capital necessary to develop emerging technologies. Asian economies with higher levels of market-based financing tend to show stronger innovation (Figure 1.5).
In Asia, economies with more developed equity markets, such as China, Japan, Korea and Chinese Taipei, have already seen the rise of globally competitive firms in sectors such as advanced manufacturing, electronics and biotechnology. The ability to access long-term, risk-tolerant capital in public equity markets is essential for sustained innovation and technological advancement.
By providing companies with access to capital, which enables them to fund growth, expand operations and invest in innovation, public listings play an important role in supporting corporate investment. An analysis of investment (measured as the capital expenditure (capex) and research and development to sales) shows that following an initial public offering (IPO), investment ratios across industries in both Asia and worldwide tend to increase. Strong growth is observed in sectors such as technology and healthcare (Figure 1.6, Panels A and B).
Asian jurisdictions with deeper capital markets tend to innovate more
Note: The innovation score is a score assigned by World Intellectual Property Organization (WIPO) for the innovation capabilities and results of world economies. It measures innovation based on criteria that include institutions, human capital and research infrastructure, credit, investment, linkages, the creation, absorption and diffusion of knowledge and creative outputs.
Source: OECD Capital Market Series dataset; WIPO (2025[13]), Global Innovation Index 2024, https://www.wipo.int/web-publications/global-innovation-index-2024/en/index.html; see Annex for details.
Following an IPO, investment ratios increase across industries
Note: The analysis covers IPOs conducted between 2008 and 2020. Across the four industries analysed, there were 7 051 IPOs globally, including 4 748 from Asian markets, representing 70% of global IPOs and 77% of all IPOs in Asia during this period.
Source: OECD Capital Market Series dataset; see Annex for more details.
Investment rises significantly in technology companies, particularly in Asia, where it jumps from 7.5% before the IPO to 11.4% three years after the IPO. Investment ratios post-IPO also increase substantially in the healthcare sector, reaching 20.4% in Asia by the first year. Industrial companies, especially in Asia, also increase investment after going public. The effect is less pronounced in consumer cyclicals companies.
Capital markets can also help finance the transition to more sustainable business models. The transformation to a low-carbon, sustainable economy will require massive investments – both from the public and private sectors. Decarbonisation and energy efficiency models cannot be achieved without mobilising significant financial resources. Despite growing recognition of the need for climate action, Asia’s emerging markets and developing economies face a significant climate finance gap, requiring at least USD 1.1 trillion annually. Currently the region receives only USD 333 billion, largely through sustainable bonds and public sources (Basu and Cheng Hoon, 2024[14]).
This gap reflects deeper structural challenges. Smaller economies often lack the capacity to access global climate funds, while in larger markets, investor scepticism towards the credibility of green bonds results in little to no pricing advantage over traditional bonds. In addition, significant gaps in data, disclosures and taxonomies, exacerbated by inconsistent climate policies, undermine investor confidence and raise concerns about greenwashing.
However, the transition to a greener economy requires rapid deployment of clean technologies across sectors. Deep and well-functioning capital markets are essential to channelling the scale of investment needed. Without them, Asia’s climate and energy goals will remain out of reach.
Capital markets have the capacity to mobilise large volumes of financing from a diverse pool of investors, enhancing market depth, improving price stability and reducing financial stability risks by mitigating reliance on any single funding source. Moreover, market-based financing has been proven to be less countercyclical than bank financing. Capital markets are also well suited to provide financing to smaller companies. Asia has been the most dynamic region in introducing equity markets for growth companies. At the start of 2024, 8 586 companies were listed on these growth markets with a total market capitalisation of USD 3.3 trillion, accounting for over half of all listed growth companies globally, and around 80% of their market capitalisation (see Chapter 2). This dynamic ecosystem for growth companies is in large part a result of the rapid development of equity markets for larger companies in the region, as the two are closely interconnected.
Moreover, once a company is publicly listed, it often returns to the market to secure additional funding for expansion, acquisitions or to overcome challenging economic conditions. During times of economic uncertainty, follow-on offerings are crucial for companies, both globally and in Asia, to strengthen their balance sheets and maintain operations. In the wake of the 2008 financial crisis and the COVID-19 pandemic, many listed companies tapped public equity markets to secure capital, easing liquidity challenges and supporting recovery efforts.
Today, Asia accounts for 31% of global GDP, underscoring its substantial weight in global markets. The region represents a quarter of global public equity market capitalisation and more than half of the world’s listed companies, with an even stronger position in terms of growth companies, where it leads in both market capitalisation and number of listings. However, the level of development of Asian capital markets varies across segments and often falls short of its economic weight.
Asia has a sizeable private equity industry overall, especially in venture capital, reflecting a focus on early-stage investment. However, private equity is concentrated in a few markets and has significant room to grow. In corporate debt markets, Asia accounts for a substantial portion of global outstanding corporate and sustainable bonds, though its private debt markets are still nascent and syndicated loans remain limited. The size of domestic institutional investors - particularly pension funds - is smaller than what would be expected given the region’s economic size.
Asia has a strong capital market foundation, but continued reforms are needed to facilitate access to market-based financing and expand the institutional investor base. This will help ensure Asia’s capital markets match its economic significance and support sustained growth.
Asia’s capital markets reflect its growing influence and potential for further development
Note: Data on corporate and sustainable corporate bonds refer to outstanding amounts. The figure uses information from 2024 or the latest available year. Pension fund data are for 2023, except for Pakistan (2022) and Thailand (2021). Insurance company data mostly refer to 2020.
Private equity and venture capital data are as of June 2024.1
Source: OECD Capital Market Series dataset; OECD Corporate Sustainability dataset; LSEG; Bloomberg; FactSet; Preqin; OECD (2024[15]), Pension Markets in Focus, https://www.oecd.org/pensions/pensionmarketsinfocus.htm; Thinking Ahead Institute (2025[16]), Global Pension Assets Study 2025, https://www.thinkingaheadinstitute.org/research-papers/global-pension-assets-study-2025/; IAIS (2025[17]), Global Insurance Market Report, https://www.iais.org/uploads/2024/12/Global-Insurance-Market-Report-2024.pdf; ICI (2025[18]), Worldwide Regulated Open-End Fund Assets and Flows Fourth Quarter 2024, https://www.ici.org/statistical-report/ww_q4_24; Table A.2 and A.3 in the Annex; see Annex for details.
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[1] World Bank (2024), Listed domestic companies dataset, https://data.worldbank.org/indicator/CM.MKT.LDOM.NO (accessed on 13 March 2025).
← 1. Pension fund and investment fund total assets for Asia cover China, Hong Kong (China), India, Indonesia, Japan, Korea, Malaysia, Pakistan, the Philippines, Singapore, Sri Lanka, Chinese Taipei, Thailand and Viet Nam. Insurance company assets cover the same countries except Viet Nam.