Ocean Tomo[1] company has released an interim update to the Annual Study of Intangible Asset Market Value (IAMV) in September 2020[2]. The study examines the components of market value, specifically the role of intangible assets across a range of global indexes, and how COVID-19 has affected that.

Ocean Tomo has long been examining the components of the market value of global indexes, particularly the role of intangible assets. The studies focus on the market penetration of intellectual capital over the last quarter century. The term intellectual capital generally refers to the traditional intellectual property assets such as patents, trademarks and copyrights.

In its study, Ocean Tomo analysed not only the American and European markets, but also the Asian markets, during which it came to the following conclusions.

 

The source of the picture: https://www.oceantomo.com/intangible-asset-market-value-study/, 2021. május 19.

In 1975, intangible assets accounted for only 17% of the market value of the S&P 500[3], the 500 most valuable companies listed on the relevant US stock exchanges. In 2015, that figure rose to 84%.  In 2020, Ocean Tomo updated the IAMV Study to investigate the economic effects of the novel coronavirus. The study found that COVID-19 has accelerated the trend of increasing IAMV share, with intangible assets now commanding over 90% of the S&P500 market value.

In the case of S&P Europe 350[4], the 350 leading companies in the most developed European markets, the growth trend can also be observed based on the earliest data series available from 2005. According to this data series, in 2005 only 71%, in 2020 75 % of the market value of the surveyed European companies was provided by intangible assets, i.e. mainly intellectual property rights. Europe remains second to the U.S. in the relative contribution of intangible assets to market capitalization as measured by the study and is still well ahead of the major Asian markets.

According to the China Shanghai Shenzhen CSI 300 index[5], intellectual property accounted for 44% of the market value of Chinese companies in 2020. However, in Japan (Nikkei-225[6]) this number is even lower, only 32%. In contrast, in Korea (KOSDAQ index[7]), intangible assets already accounted for 57% of the value of firms. Ocean Tomo also investigated the effects COVID-19 has had on Asian market values.  They find that, in China, Japan, and South Korea, COVID-19 has resulted in a decline in IAMV share in the Shanghai Shenzen CSI 300, the Nikkei 225, and KOSDAQ Composite Index, respectively.

While part of this is explained by reporting differences and higher volatility compared to the S&P500 IAMV, South Korea has also been notably lauded for its success in controlling the outbreak within its borders, while never fully locking down.  The economic effects associated with its more successful pandemic response than its regional (and global) neighbours could have had more severe consequences for intangible asset values.

Data from over 25 years of analysis for the U.S. make it clear that idea-driven economy has burst forward. This change is regarded as significant as the industrial revolution more than a century ago. Even though analysis for such a long period is not available for European and Asian markets, recent trends and the changes in the nature of companies that increasingly dominate these economies suggest something of the same nature has occurred and is likely continuing to occur there.

Source:

Ocean Tomo, Intellectual Capital Equity: Ocean Tomo Intangible Asset Market Value Study (https://www.oceantomo.com/intangible-asset-market-value-study/)

 

[1] Established in 2003, Ocean Tomo, LLC, is the Intellectual Capital Merchant Banc™ firm providing Opinion, Management and Advisory services centered on finance, technology and related intellectual property assets.

[2] https://www.oceantomo.com/intangible-asset-market-value-study/

[3] The Standard and Poor’s 500 is a free-float weighted measurement stock market index of 500 of the largest companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices.

[4] The S&P Europe 350 index comprises 350 leading blue-chip companies from 16 developed European

markets.

[5] China’s Shanghai Shenzhen CSI 300 Index is a free-float weighted index comprising 300 A-share stocks listed on the Shanghai or Shenzhen Stock Exchanges.

[6] Japan’s Nikkei-225 Stock Average is a priceweighted average of 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange

[7] Korea’s KOSDAQ Index is a capitalization-weighted index that measures the performance of the KOSDAQ market, a collection of South Korean equities.

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