A Challenging Year for the London Market
The London Stock Exchange (LSE) is grappling with its worst exodus of companies since the financial crisis, with 88 firms delisting or transferring their primary listings in 2024. Only 18 new companies joined the market, marking the lowest number of listings in 15 years. This trend has raised concerns about London’s diminishing appeal as a financial hub, especially as more companies look to New York for better valuations and liquidity.
Why Are Companies Leaving?
Key reasons driving firms to leave the LSE include:
- Access to Capital: The US offers a deeper investor pool and superior share liquidity.
- Valuation Disparity: Many companies find higher valuations in the US compared to the UK.
- Market Composition: The FTSE 100 is heavily weighted toward traditional sectors like energy and mining, unlike the US S&P 500, which boasts high-growth technology stocks.
Some notable departures include:
- Ashtead: 98% of its profits are generated in the US.
- Flutter Entertainment and CRH: Both moved to New York, representing a combined valuation of £94 billion.
Efforts to Revive London’s Appeal
Despite reforms to pension systems and listing rules, many believe these changes have yet to yield significant results. However, recent developments, such as the anticipated IPO of fast-fashion giant Shein, could provide a much-needed boost to London’s capital markets.
Chancellor Rachel Reeves described the upcoming Canal+ listing as a "vote of confidence" in the UK’s financial stability, but critics argue that more needs to be done to reverse the trend.
Implications for Investors
- FTSE 100 Performance: The index gained 8% in 2024, but it lagged behind the US S&P 500, which grew by 27%, highlighting the disparity in market growth.
- Sector Exposure: The FTSE’s focus on traditional industries offers stability but lacks the dynamism of US markets, making it less attractive for growth-focused investors.
- Global Opportunities: Companies delisting from the UK may present opportunities for investors in US markets, particularly in sectors like technology and high-growth industries.
What Lies Ahead for the LSE?
The departure of high-profile companies underscores the challenges facing the UK as it seeks to maintain its status as a leading financial hub. While reforms are underway, experts caution that meaningful changes must align with global market dynamics to retain businesses.
Investors should monitor the impact of these reforms on London-listed companies and assess potential shifts in global investment opportunities, particularly in US-listed firms.
Source: (FT.com)
