Signs of life on stock market, expert tells economic attachés

AERL members visit the London Stock Exchange

Stocks were up at the London Stock Exchange the day economic attachés visited for an AERL briefing.

The predominance of green on the electronic ticker was echoed by Alastair Walmsley, head of primary markets at the LSE, who told attachés there were “signs of recovery” in the stock market as investors increased their appetite for risk.

Attachés learned that the first quarter of 2013 has seen capital inflows into equities, a marked reversal of the trend of the past five years. “The retail investor is looking for growth opportunities, particularly companies exposed to the BRIC economies,” said Walmsley.

However he warned that the market was “still fragile” and that marginal businesses may not readily be able to secure capital.

For the coming year, he predicted more IPOs from regions that had gone quiet, including Africa, Latin America and Eastern Europe, while continued activity from Russia, the CIS and China was expected.

Beyond traditional commodities, oil and gas, sectors of interest include high-growth technology companies and privatisation programmes in Eastern Europe where the domestic markets lack scale to raise funds.

Walmsely admitted the LSE faced “challenges” in the near-term due to changes to the regulatory framework coming out of the EU. However he said this was unlikely to affect the competitiveness of the LSE in the long term because its edge came from its global outlook. Of the 3000 companies listed on the LSE, 600 come from 115 different countries and London has the largest pool of investors dedicated to international companies.

Robust standards, enhanced credibility and an “eco-system” of peers and analysts added to the attractiveness of the LSE.
Innovations will see the LSE introduce platforms to widen access to capital. The exchange is also positioning itself as a partner for smaller domestic exchanges, not just in terms of dual listings and cross-listings, but for offering expertise particularly for emerging market economies.