At the equivalent of RM11.4t, the gap between London and Paris is only RM617b
THE crisis of confidence in UK assets is running so deep that the country is close to losing its crown of Europe’s biggest equity market.
This year’s decline in London stocks has reduced the combined market capitalisation of companies with a primary UK listing to within touching distance of its near- est challenger, Paris. At the equivalent of US$2.46 trillion (RM11.4 trillion), the gap between them is only US$133 billion, close to the lowest on record, according to an index compiled by Bloomberg.
The differential between the UK and French markets has been gradually eroding since Britons voted to leave the European Union in 2016. But the unprecedented market turmoil unleashed in the past week by Prime Minister Liz Truss has dealt a crucial blow, damaging economic confidence and sending the pound to a record low.
“London’s crown as the top European trading centre was already losing its shine even before this latest confidence crisis and the plunge in sterling, with the impact of post-Brexit trade issues still weighing on sentiment,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
Sept 28’s intervention by the Bank of England to calm markets has only “bought time” in stabilising the pound and seeking to avoid broader deterioration in UK household finances and asset markets, Jefferies strategists led by Sean Darby wrote in a note.
Only once before has the value differential between the UK and French equity markets been narrower. That was in Januar y this year when the third-largest company in the FTSE 100 Index, BHP Group Ltd, exited London.
The weakness of sterling since the Brexit vote has contributed to the decreasing value of London’s equity market, making British companies more attractive to foreign bidders. The UK has become a fertile ground for takeovers, also reflecting cheap valuations and lack of protectionism.
Another factor has been London’s increasingly fragile position as one of Europe’s premier listing venues. Just US$1.38 billion has been raised through initial public offerings in the UK this year, representing 14% of the European total, the smallest share in more than a decade, according to data compiled by Bloomberg. — Bloomberg