Reforms won’t be enough to fix equity markets, warns Peel Hunt
One of the City’s most active investment banks has warned that the “considerable activity” to reinvigorate the UK’s equity markets will nonetheless not be enough to turn around a 20 per cent tumble in the number of listed companies over the past five years.
Charles Hall, head of research at Peel Hunt, has warned in a note seen by City PM that while proposals to simplify the listings regime and encourage pension funds to invest in UK equities will help reverse the trend, more attention needs to be paid to smaller listed companies – many of whom are increasingly finding life as a public company tough.
Hall has called for the voluntary pact between the Treasury and pension funds to specifically include listed smaller companies as a welcome boost.
The note also suggested that changes to the research base in the UK, mooted in a recent government-backed review compiled by Hogan Lovells’ lawyer Rachel Kent, will go some way to addressing the lack of institutional attention paid to the smallest companies on the markets.
In particular, Hall backed the formation of a ‘research platform’ which would allow retail investors greater sight of institutional analysis of firms on public markets.
The calls for further changes to equity market rules come after a slew of take-private deals in recent years, with relatively under-valued UK firms being picked off by often foreign buyers.
UK firms trade at a price-to-earnings discount compared to peers in the United States, and smaller companies in particular have become easier prey thanks to a weaker sterling currency.
Senior City figures have also identified a focus on ‘short-termism’ among London investors.
Outgoing BT boss Philip Jansen pinned the blame for the telecoms giant’s slumping share price on a failure of the City’s institutional investors to recognise the value of his long-term investment in digital infrastructure. And other critics have pegged hit-and-run short-sellers as being too blame for nervousness.