Volatility measures elevated and weighing on investor sentiment

Price discovery is impacting investment market conditions, triggering the fourth consecutive quarter of slowed growth and the first quarter of annual declines in global transaction activity since the pandemic. Bidding dynamics weakened across sectors during Q3, as the average winning bid-ask spread has declined as well as the variability of bids on transactions. These dynamics are impacting market efficiency and reflect a prolonged phase of price discovery which is muting transaction markets.

Global direct investment declined by 24% during Q3, bringing year-to-date volumes to US$814 billion. Quarterly declines were experienced across all three regions during Q3, as interest rate increases and underwriting shifts are leading to more widespread repricing on transactions in most markets. In Asia Pacific dynamics are more nuanced, with healthy deal activity in the quarter in Australia and South Korea in particular. The drop-off in Q3 activity is expected to continue through the fourth quarter and trigger year-over-year declines from record 2021 activity levels.