London malaise....26 Sep 2021 12:56
Concerns over the lack of ambition and risk appetite in London is rife among CEOs in the 100 and 250 list of companies. Check out the US 500 top company index which has tripled investors money in the last 15 years or so, our top 100 full of banks, oils and drug companies returned 80% and most of that was via dividends as share prices fell 12 per cent.
In June this year James Anderson of Baillie Clifford described the ftse 100 as a "19th century index" with a deep sickness. Martin Sorrel founder of WPP called it a "museum" and the director of Market oversight said London listing were based on rules designed when we stored data on floppy discs. Meanwhile US private equity firms are picking off unloved UK stocks. There have been 548 takeover deals so far this year worth over £55bn double last year. UK stocks trade at a discount to global peers on pe ratios, in the ftse its 14x versus 20x in the S&P 500. The pool of listed companies is shrinking: on Aim its halved to 836 since 2007. UK companies now look across the pond to list.
The Office for National Statistics data suggests UK pension funds steadily reduced exposure to UK equities from 50% in 1990 to 15% in 2015. Its said this is the only country in the world where the main savings institutions have abandoned the domestic market. Take tech, for example it comprises 3% of the ftse 100, across the pond its 28% in the 500.
Something needs to happen and quick. You need more listings, more liquidity and more volume and above all a change in the negative attitude
which does not welcome risk takers for the dread of failure. Safety first above all. The forces fuelling US mrkts could change rapidly and with them the debate over London's flagging performance.
The BOE has warned the energy crisis will push inflation above 4% this winter and If we do get a rip-roaring inflationary recovery, the UK market is ideal. If we get inflation, you want to hold real assets or shares in them, commodities, miners, oils and property. If that's what its going to take to get London off it's backside and reward risk takers, early stage companies and to stop disapproving of entrepreneurs and business enterprise then so be it. Bring it on!
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