Andrew Mann from JM Finn speaks about the UK stock market and takeover approaches for UK businesses.
A warm bank holiday weekend is behind us, and with the FTSE 100 index standing at an all-time high, things also seem to be heating up for the UK stock market. Is the recent rally a sign that investors have finally cottoned on to the huge value on offer in our domestic equity market?
The private bank Coutts, which is part of Natwest, doesn’t seem to think so, with news that it is significantly lowering the amount of UK equities held across a number of its managed funds, reducing ‘home bias’ to bring the allocation more in line with global indices.
The increasing number of takeover approaches we have seen for UK-listed businesses is perhaps more positive news though.
In April the technology company Darktrace agreed to be taken over by US private equity firm Thoma Bravo, paper and packaging business DS Smith succumbed to US rival International Paper, and last week the mining company Anglo American said it had rebuffed an offer from Australian rival BHP Billiton.
Although I am encouraged that these bids go some way to underlining the relative attractiveness of UK businesses, what troubles me from a longer-term perspective is that none of the bidders are themselves UK listed.
In other words, whilst they may maintain a secondary listing in the UK following the completion of any deal, it is almost certain that these businesses will disappear from the headline FTSE 100 index.
With Paddy Power owner Flutter Entertainment, and another packaging business Smurfit Kappa also in the process of moving to the US, we still need to find ways to make the UK more attractive to new listings, or risk yet further stagnation.
Please note that the value of investments and the income from them may go down as well as up and you may not receive back all the money you invest. Past performance is not a reliable indicator of future results. The views expressed are those of the author and should not be considered a recommendation or solicitation to buy or sell any securities.
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