TITLE OF POSITION PAPER

Submitted by:

GROUP PIONEERA
Yamamoto, Brian Jefferson -
Batalla, Sheryn Monique A.
Cawagas, Jhunalyn Iris R.
Sabangan, Patricia Isabel T.
Reyes, Zyril Jenesis U.

Submitted to:
London Stock Exchange Group

November 18, 2024

RESILIENCE, RISK, REWARDS: HOW GLOBAL EQUITIES DRIVE ECONOMIC
GROWTH AND JOB CREATION

The global landscape is constantly evolving, driven by economic power realignments,

rapid technological breakthroughs, and geopolitical events. One such event, unforgettable to
most, was the Global Financial Crisis of 2008 which triggered a massive downturn in global
equities, severely disrupting economic growth and job creation. According to a detailed
report on global equities 16 years after the Global Financial Crisis by Soubeyran and
Baronyan (2024), emerging European and UK markets experienced the steepest losses while
the United States, although initially affected, displayed more resilience during the crisis. This
event exposed markets' vulnerabilities worldwide, causing central banks to implement
zero-policy rates, aimed at easing the crisis’ impact. At the same time, financial guarantees
from entities like the EU and IMF were provided to struggling emerging economies. Sixteen
(16) years have passed since the crisis and the aftermath of the GFC has resulted in a more
concentrated global equity market. It can be observed that there is significant growth in
global equity markets with the US experiencing substantial growth and dominance
specifically in the technology sector contributing 181% of the total return while emerging,
UK, and Europe ex-UK equities lag behind yet still show solid growth. As we reflect on this
profound event in history that has redefined the financial world, it is important to understand
the role of global equities and their fundamental impact on job creation and economic
growth.
Stocks of companies listed on public exchanges worldwide are referred to as global
equities. When individuals invest in these stocks, they provide capital to companies which
helps them to expand, innovate, and generate employment opportunities. By enabling
efficient resource allocation, well-functioning equity markets boost productivity, increase job
availability, and enhance overall economic stability, thus forming a strong foundation for
sustained progress (Demir, 2024). A thriving equity market holds the power to influence job
creation as it often sparks not only consumer confidence but investor confidence. This surge
in optimism encourages companies to expand their operations, invest in new ventures, and,
critically, grow their workforce. Fueled by capital inflows and market momentum, companies
then have the resources to scale up and invest in their businesses, which includes hiring more
employees (Kelly, 2024). Conversely, falling equity markets discourage individuals from
investing and spending money, thus economic slowdown and unemployment may occur.
Moreover, a well-developed global equity market fosters efficient risk distribution,
connecting investors with diverse risk appetites and time horizons to enterprises in need of
funding. This efficient distribution of risk encourages businesses to take calculated steps
forward, promoting entrepreneurship and innovation without destabilizing the economy
(Dudley & Hubbard, 2004). According to Janiga (2024), despite potential risks, the outlook
for global equities is generally positive, supported by factors such as expected earnings
growth, potentially easing central bank policies, and a potential rebound in global economic
activity (Hussain et al., 2024).
The correlation of global equities towards job creation and economic growth is clear:
a strong equity market can fuel economic activity and open doors to employment. This paper
stands firm on the position that global equity investments are crucial for fostering economic
growth and job creation. Furthermore, the discussion will delve into the examination of the
top-performing countries in America, Asia, and Europe in terms of their equity markets and
their impact on the economy and employment, specifically the United States of America,
Hong Kong, and the United Kingdom respectively.

1. MATERIALS
In a study by Aldatmaz and Brown (2020), private equity investment across countries
can manifest a positive spillover effect or the unintended optimistic impact that goes beyond
the scope of a country which improves economic performance. Their findings show that there
is an increase in profit, labor productivity, employment, and capital markets in publicly listed
companies located in the same country and industry with private equity markets. In
measuring a nation’s economic activity or the Gross Domestic Product (GDP) which is made
up of aggregate consumption, expenditures, investment, net imports, and exports of goods
and services, each component is vital in measuring future economic forecasts. Among those
components, equity investment evidently plays a crucial role as it is linked to economic
growth. Moving on, addressing economic crises is not limited to stabilizing a nation’s GDP
because it also comes with expanding the citizens’ standard of living as well as increasing
revenues and capital, especially providing employment for the increasing population.
Moreover, as the vast changing technology continuously grows, a study by Cornell (2010)
explained that technological innovation by Solow’s growth model is the main driver of
economic growth by enhancing marginal productivity per capita, overcoming limitations set
by diminishing returns which eventually makes an increase in enduring capital per output
further achievable. However, to establish certain growth as the aforementioned drivers of the
economy, the role of equity investment allows companies to raise their capital without any
debt expenses (Indeed Editorial Team, 2024).
Examining the top three performing continents and countries proves that equity
investment facilitates job creation. The United States of America reportedly generated nearly
12 million jobs coming from private equity firms that make up 6.5% of its total gross
domestic product which amounts to $1.4 trillion (Rizoli, n.d.). Whereas in Asia, Hong Kong
continuously expands at a moderate pace during the third quarter of 2024. Although there
have been external challenges in recent years, Hong Kong's economy is expected to maintain
its growth with a 1.8% increase year-on-year (Hong Kong Economy - Hong Kong Economic
Situation - Latest Developments, 2024). Total employment increased by 1,700 to 3,710,200
with a seasonal unemployment rate staying low at 3.0% in September-August of 2024, and its
GDP amounts to $382.1 billion. Meanwhile, the United Kingdom’s labor force increased by
210,000 last year while the employment rate remained at the same level with 74.8% and GDP
of $3.34 trillion (United Kingdom - Place Explorer - Data Commons, n.d.).

Capital markets significantly contribute to the economic growth of a country by

providing a platform for companies to have access to long-term financing. For example,
companies issue stocks or bonds that attract investments which are crucial for expanding the
operations and entering into a new market venture. A strong capital market ecosystem can
enhance liquidity and investor confidence, which makes it easier for the business to perform
capital-intensive projects. Also, the presence of transparent capital markets can improve
corporate governance by simply increasing analysis and accountability. This not only benefits
the shareholders of a company but also creates a stable economic environment for a country.
An example is LSEG which facilitated the growth of both large corporations (multinational,
etc.) to small and medium businesses/enterprises (SMEs) that boost the economy in different
sectors.

The capital market can directly lead to job creation since it allows the companies to
raise funds or capital to hire employees as they expand or grow in various sectors
(technology, etc.) With Job Creation - by the High-Growth Companies, the 1000 companies
to Inspire Europe were able to report that the high-growth companies were not only able to
increase revenue but also in terms of expanding their workforce. The companies were able to
hire many workers in certain sectors like in technology due to innovation as an example
resulting in new opportunities for employment. The Sectoral Impact – the range of sectors are
represented by exchanges plays a crucial role in terms of stabilizing and widening the
economy. Based on the LSEG report, the sectors of manufacturing and operating
(engineering) even the technology field, were able to play a crucial role in driving economic
growth and even job creation in the USA, UK, and Hong Kong.

2. Antithesis
3.1 Risk of market volatility: Unexpected pandemic
The global stock market's performance was greatly affected by the COVID-19 pandemic in
the first quarter of 2020, leaving businesses and individuals with a poor cash flow. When the
quarantine was imposed, the operations of the firms ceased, and people's consumption was
reduced, affecting the overall output of the economy (Mazur, Dang & Vega, 2021). Not all
firms or sectors had negative returns and benefits during the pandemic, whereas most firms
experienced a collapse in the prices of stock, affected by the economy's situation. Therefore,
shareholders in the industry carry the burden of risk during the volatility of the stock market,
especially the unexpected pandemic, which cannot be forecasted. The global stock exchange
fell during COVID-19 in March of 2020. Figures 1, 2, and 3 show the price index of the
Financial Stock Exchange Group, the New York Stock Exchange, and the Hang Seng,
respectively, in the past five years.

Fig 1.. Price index of the Financial Stock Exchange Group over the period past five years.

Fig 2.. Price index of the New York Stock Exchange over the past five years.

Fig 3.. Price index of the Hang Seng over the past five years.
3.2 Risk of market volatility: News on industry performance and economic factors
According to the World Economic Forum, the IMF stated that there would be economic
growth for Asia in 2020, for the first time in 60 years. Economic shocks from lockdowns
across the regions. In China, GDP fell by 6.8% which was above the predicted 6.5%
decrease. During 2020, a 2.5% decrease was expected in China’s economic growth.

In the US, the unemployment rate increased by 14.7% as of April 2020. News from the US
Commerce Department states a rapid decline with a drop of 4.8% during the first quarter of
2020. This was considered the sharpest contraction since the global financial crisis of
2007-2009. The figure below shows the quarterly GDP growth in the United States from
2009 to 2020.

Fig. 3 Quarterly GDP Growth in the United States, 2009 to 2020

In addressing market volatility to create security among investors, preemptive measures are
an option for these types of risks. According to the US bank, a diversified portfolio can
reduce market volatility by ensuring that investments will perform well over time. With a
diversified portfolio, various investments are spread across asset classes that can balance
risks and returns. If one of the investments performs badly, other investments can offset the
loss. Fluctuations, brought by this unexpected crisis, can be managed specifically for markets
that are driven by external factors (e.g. COVID-19 pandemic). Various regulatory measures
such as persuasive long-term investments and market control speculations can also reduce
excessive volatility. During the COVID-19 pandemic, regulators emphasized the importance
of transparency to aid panic selling, which allowed investors to make informed decisions
(Chaudhary et al., 2020). It has also been brought to light that psychological factors (e.g.
overconfidence, aversion loss, and herding behavior) along with investor education, can
stabilize biases which will improve decision-making. Thus, achieving market stability,
especially during crises.

3.3 Short-Termism
Short-term investors are notorious for being troublemakers in the stock market- the
investment lasts no later than one to two years. Long-term investors and policymakers
discourage this type of trading as it is marked as "value-destroying" short-termism.
According to some researchers, short-term trading creates risk and volatility in the market,
sacrificing long-term profits, sustainability, and values. This type of method in stock trading
not only gives volatility in the market. It manipulates the time frame in price charts that show
the performance of the company's asset- which is the major tool for potential stockholders to
chip in. From an investor's view, this reduces welfare and increases fees, affecting their
decision-making and behavior when approaching stock trading (Barsboom, Janssen, Strucks
& Zeisberger, 2022) Therefore, a policy should be implemented to regulate and tip the scales
in favor of long-term investments. For instance, the Tobin tax, these are small tax on
transactions that reduces speculation and high-frequency transactions making short-term
trading expensive.

CONCLUSION

A boosted global economy is essential to ensure stable jobs and continuous

opportunities for people. One driver that can make this possible is a stable and efficient
equity market. This is because equities can fuel economic activities that are needed to ensure
investments and business opportunities that, later on, will create jobs. The stock investment
being made towards these different companies who own the securities is a pathway for
innovations, expansions, and more room for other people seeking employment and
opportunities. When these people have the capital to do more for their companies, it is also a
chance to create a space for new job opportunities. This correlation is visible with
top-performing countries that have a growing and stable stock market and high employment
rates. In addition, their GDP is also good making their whole economy grow and making the
life of the people living these great and stable.
 Seeing a developed country striving with an excellent stock market backing their
economy proves one thing and it is the vast opportunities that can be made to make the
people's lives better, secure, and sustainable with a lot of good possibilities and job
opportunities. When the capital cycle from the equity bought by individuals starts, it is also
the start of a long cycle of growth not just for the company but all the people who will be
involved. When this capital is translated into wealth for every individual, then the
improvements towards life necessities such as education and healthcare will also be enhanced
for the community. A thriving economy started with a capital market will reflect the nation's
capability to sustain the growth it needs over time, attracting more sustainable investments.
By giving importance to the stock investment that funds people's opportunities, the whole
future ahead of us will also be secured, and it is also the life of future generations.

To give the study more perspective, it is recommended that different aspects that can
be directly related to the financial market be examined. It is important to remember that
monetary policy, political situation, and a country's whole financial system affect its capital
market. This study is limited to the effects of the equity market on the economy and how it is
relevant to creating growth and job opportunities. Good policies aligned with the financial
market opportunities are a relevant part of having good economic growth. It is the needed
support of the country to make a robust change, growth, and opportunities needed.
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Aldatmaz, S., & Brown, G. (2020). Private equity in the global economy: Evidence on

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https://www.sciencedirect.com/science/article/abs/pii/S0929119918307405

Borsboom, C., Janssen, D.-J., Strucks, M., & Zeisberger, S. (2022). History matters: How

short-term price charts hurt investment performance. Journal of Banking & Finance,

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Chaudhary, R., Bakhshi, P., & Gupta, H. (2020). Volatility in International Stock Markets: An

Empirical Study during COVID-19. Journal of Risk and Financial Management,

13(9), 208. MDPI. https://doi.org/10.3390/jrfm13090208

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BODY (3 people)
Literature Review
● Impact of global equities on economic growth (LSEG data) - How Capital Markets
Enhance Economic Performance and Facilitate Job Creation- study

● Examine literature that links equity investment to GDP growth, with emphasis on job
creation.
- Economic Growth and Equity Investing
-

● Review research on the potential of emerging markets to foster growth and

employment through equities. - dito ko ilalagay mga data shits

HanSeng Stock Index - HSI serves as a market benchmark that reflects the overall
performance of the Hong Kong stock market. Its free float-adjusted
mkt-capitalization-weighted stk-mkt index and used to record and monitor daily changes of
the largest companies of the market.

FTSE - The Financial Times Stock Exchange 100 Index, also called the FTSE 100 Index, is a
share index of the 100 companies listed on the London Stock Exchange with the highest
market capitalization.

a. Datas to provide
- GDP
- ENPLOYMENT

● Look at studies on corporate governance and CSR and their relevance to sustainable
growth and job creation.- dito ang mga relevant studies

Corporate Social Responsibility is basically made up of sustainable goals established by a

corporation which sends

The impact of social responsibility on corporate financial performance: A systematic

literature review - Coelho - 2023 - Corporate Social Responsibility and Environmental
Management - Wiley Online Library
REFERENCES:
updated news on global equities per continent

Effects of the stock market in different countries on their economic growth

Stock Market and Economy, Malaysia

International Capital Market and Employment

Does the Equity Market affect Economic Growth?

A Review of the Global and Local Securities Market in 2023.

FOR DATA:

UK price index
UK Stock Market Outlook 2024

HongKong Price index

HKEX in 2023: Year in Review

Resilience and Reform: HK Adapts to Change

USA Price Index
Stocks close out 2023 with a 24% gain, buoyed by a resilient economy

Australia. September 2014 employment rate

Australia. September 2024 employment rate

Australia Employment Rate News

Comparison between European countries, Sweden, Germany, United Kingdom

Germany Employment Rate News 2023

Sweden Employment Rate 2023 News

Employment Rate UK 2004-2024 News.