Stock market investors express concerns about the possible future of the London Stock Exchange
Let me break it down for you: The vibe around the London Stock Exchange is pretty grim, based on chats top fund managers have had with the government. Nick Lawson, CEO of Ocean Wall Investments, put it bluntly: UK stocks are at an all-time low.
Lawson and other heavy-hitter investors like David Cumming from Newton Investment Management, Andy Brough from Schroders, and Michael Stiasny from M&G Investments recently sat down with Varun Chandra, the government's special adviser on business, to hash out ways to rejuvenate the stock market (the FT is the source for this meeting).
When Lawson spoke to BBC Radio 4's Today Programme, he expressed relief that the UK's Labour Party seems willing to lend an ear this time around. He pointed out that, back in the early 2000s, UK equities made up a whopping 45% of UK pension fund holdings. Fast forward to today, and that number's shrunk to a measly 3%. This drastic reduction in investment contributes to a lack of liquidity, leading to a drop in the value of British stocks.
Rumors have been swirling that the government might force pension funds to put a certain percentage of their money into UK equities in an attempt to prop up the stock exchange. Lawson hinted that this could happen soon, stating, "I think there's a feeling now that we don't have long left." According to one Schroders manager present at the meeting, "I am the unofficial liquidator of London's stock exchange."
UK companies have been on the receiving end of a lot of foreign takeover bids due to the low cost of British equities. Many more firms have delisted from the stock exchange than listed. Lawson summed it up by saying, "Many brilliant UK companies now have become value traps, that's why they're being bought by private equity and overseas buyers."
Lawson took a swipe at fellow fund manager Terry Smith, who asserted last week that the UK needed "better companies" for investors to buy into. Lawson fired back, calling Smith's claim that most of the UK market fails to meet the required quality for investment "absolute nonsense."
- The current state of the UK stock market, as described by Nick Lawson, CEO of Ocean Wall Investments, is significantly impacted by the reduction in investment from pension funds, with UK equities accounting for only 3% compared to 45% in the early 2000s.
- The financial sector, including the stock markets, has been influenced by politics, as there are rumors that the government might enforce pension funds to invest a certain percentage of their money into UK equities to support the stock exchange.
- The value of British stocks has been affected by the general news surrounding the London Stock Exchange, with many UK companies being foreign takeover targets due to their low cost and the lack of liquidity in the market. This has led to a high number of firms delisting from the exchange.
