City investment bank Peel Hunt has warned that the ‘shrinking pool’ of London-listed companies risks creating a downward spiral of slowing economic growth (Daniel Leal/PA) (PA Wire)
City investment bank Peel Hunt has warned that the ‘shrinking pool’ of London-listed companies risks creating a downward spiral of slowing economic growth.
The number of companies making up the FTSE Small Cap Index has fallen by 21% during the past five years, while the number in the FTSE Fledgling Index is down by 28%. Peel Hunt said the numbers would be even worse if listed funds were excluded.
“In case anyone was thinking that this is due partially to some companies moving to AIM – well the AIM All-share has also contracted, with a reduction of 97 companies (12%) over the past five year,” head of research Charles Hall said.
Hall said serious work was needed to tackle the decline.
“There is a problem – There has been considerable de-equitisation of the UK market over a number of years and the pace is accelerating,” Hall said. “Reform of the listing requirements and research rules should help, but much more needs to be done to ensure that being listed is seen as an attractive option.”
He listed nine different negative consequences from the lack of listings. These are slower economic growth, reduced attractiveness of the UK as a listing destination, a reduction in sector peers, a negative impact on the professional services industry, lower corporation tax due to new ownership structures, lower attention from international investors, less ability to manage economic shocks, a focus on narrow ownership with firms owned by less people and a ‘circle of negativity’ where the previously mentioned factors only make listing in London less attractive.
Peel Hunt blamed “the steady withdrawal of funds from UK-facing portfolios”, as equity fund flows have been negative for each of the last 18 months.
“The UK used to have a thriving UK small & midcap sector, which was theenvy of most other leading markets,” Hall said. This position has been materially undermined and squandered, which is to the detriment of UK PLC and the overall attractiveness of the UK as a financial powerhouse. As markets increasingly globalise, there is a clear risk that the relevance of the UK small & midcap market continues to diminish.”
Peel Hunt said these would help, but more work needed to be done. The research said the increase in corporation tax to 25% was “a material own goal”, and a graded version of the tax could be brought in as a politically feasible way to encourage UK listings.
It also said that a certain proportion of funds held in ISAs should be invested in UK listed assets, and that a sovereign wealth fund could be established to invest in UK businesses.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
