'Global Funds Flowing into IT'... IT Accounts for 22% of Global Stock Market Capitalization

Among Global Listed Companies, IT Firms Account for 22% of Market Capitalization

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] It has been reported on the 19th by Nihon Keizai Shimbun that capital concentration in the IT sector is intensifying in the global stock market. The digital transformation driven by the COVID-19 pandemic is cited as the background, but there are also concerns that the market is overheated.

According to financial information provider FactSet, the market capitalization of listed companies worldwide reached an all-time high of $91.3 trillion (approximately 10,396.8 trillion KRW) as of October 12. Among this, the market capitalization of IT-related industries accounted for about 22%, a level comparable to the dot-com bubble period.

In particular, the combined market capitalization of seven companies?Apple, Microsoft (MS), Amazon, Alphabet (Google), Facebook from the United States, and Alibaba and Tencent from China?accounts for 9% of the global total.

In the U.S., companies such as Nvidia and Salesforce.com have entered the top 50 globally by market capitalization, and in China, the remarkable rise of JD.com has also increased the proportion of IT companies overall.

On the other hand, the financial sector’s presence appears to be diminishing. The share of the financial sector in the global market capitalization has dropped nearly 5 percentage points since the end of last year, reaching the lowest level in 20 years at around 17%. This is attributed to the global low-interest-rate environment, which has reduced banks’ net interest margins. Especially this year, the surge in corporate bankruptcies due to the COVID-19 pandemic has inevitably increased loan loss provisions amid the economic downturn, further impacting the sector negatively.

As global capital flows into IT, warning voices are also emerging. Looking at the price-to-earnings ratio (PER), a representative stock index, Apple and MS have PERs above 30 times, and Amazon.com’s is 79 times, indicating relatively high valuations, which has drawn considerable criticism.

This content was produced with the assistance of AI translation services.