London: London is used to punching well above its weight in global financial markets. For years, the London Stock Exchange attracted an outsized share of investor capital relative to the size of the UK economy, reflecting the international nature of its listed companies, the media reported.
In 2000, UK-listed equities made up 11 per cent of the MSCI World Index — which tracks more than 1,500 companies that account for the vast majority of the global stock market by value, according to Citigroup.
Fast-forward 23 years and the UK market now represents just 4 per cent, CNN quoted the bank’s chief global equity strategist as saying in the Financial Times.
Investors have been drawn to faster-growing markets in other parts of the world, such as China and India, and to big tech IPOs on Wall Street.
Meanwhile, UK pensions funds have slashed their exposure to local stocks in the search of more certain returns on government bonds.
Then came Brexit and years of political turmoil that undermined London’s status as the king of European finance, and battered Britain’s standing in the eyes of investors.
The combined effect has weighed heavily on the FTSE 100, which, despite a recent hot streak, has trailed the gains in benchmark exchanges in the European Union and the US since the global financial crisis, CNN reported.
Fears for London’s future resurfaced over the past week after chipmaker ARM, the crown jewel of the UK tech sector, said it would hold its IPO on Wall Street, and CRH, the world’s largest building materials supplier, said it would move its primary listing to the US.
Shell, London’s largest listed company, has also reportedly considered relocating.
The health of London’s markets is vital to the UK economy, hence the growing sense of alarm.
Taken together, the company moves feel like “a vote of no confidence in the investment environment here in the UK”, said Michael Hewson, chief market analyst at stockbroker CMC Markets UK.
London is still a major international financial centre. Some $3.8 trillion of daily foreign exchange trades are transacted there, more than in New York, Singapore, Hong Kong and Tokyo combined, CNN reported.
And 70 per cent of global secondary bond market trading happens in the city, according to the London Stock Exchange.
Outside of the US and China, London also raised the most money, through IPOs and follow-on deals, in 2021. And Britain remained the world’s leading exporter of financial services that year.
–IANS