FTSE bucks trend to hold its ground: Stock market outperforms rivals

Britain’s stock market has outperformed all of its major rivals this year – despite claims that London has lost its financial crown to Paris. 

As the last day of trading in 2022 drew to a close, the FTSE 100 index of the UK’s biggest listed companies ended the year up 1 per cent, unlike its rivals in the US and Europe, which all fell. 

The US’s Dow Jones and S&P 500 are down 9 per cent and 19 per cent respectively – and the Nasdaq 34 per cent – as once-popular tech stocks have taken a battering. 

And France’s Cac 40 and Germany’s Dax have tumbled 10 per cent and 12.4 per cent respectively, as economic woes have swept Europe. 

Just weeks ago, data from Bloomberg raised eyebrows when it claimed the London Stock Exchange (LSE) had ‘lost its crown’ as Europe’s largest stock exchange to Paris’s Euronext. 

But experts were quick to point out the flaws. 

Think-tank New Financial said the data was ‘comparing apples with oranges’ by pitting the entire French stock market against only domestic British stocks, ruling out the international listings on the LSE. 

‘The UK, as a much bigger international market, is much stronger on foreign company listings than France. So not including them seems a little harsh, particularly when you’re talking about ‘the crown’ of ‘Europe’s biggest stock market’,’ New Financial said. 

Brokers and investment bankers have dismissed fears that the UK is losing its relevance. ‘It definitely doesn’t feel like the other bourses are pulling ahead of the LSE,’ said Julian Morse, chief executive of Cenkos Securities. 

Steven Fine, boss of broker Peel Hunt, pointed out several deals which hinted at growing international interest in the UK market. 

Microsoft has bought 4 per cent of the LSE, and French investment bank Societe Generale has taken a 51 per cent stake in an equities research venture with Alliance Bernstein, which has a strong presence in London. 

So too does broker Jefferies. It recently had a chunk of its shares snapped up by Berkshire Hathaway, the investment vehicle of Warren Buffett. ‘There are suddenly all these little things going on in equities. There’s some little lights flashing,’ said Fine.

Most in the City agree that 2022 has been a year to forget. Political chaos caused severe volatility in financial markets, and economic gloom forced many investors to avoid Britain. 

At a recent event held by management consultancy McKinsey, one speaker produced the alarming statistic that only around 2 per cent of UK pension fund money is invested in UK equities – the rest flows overseas or into other assets such as bonds. 

But fears that the UK is on the decline are overdone, say some. 

Fine pointed out that as debt is becoming more expensive, with interest rates rising, companies are again looking to raise equity as an alternative. 

And the UK has proved its worth. Fine said: ‘During the pandemic, private markets weren’t even shut – they were buried. 

‘But public markets remained open, and companies were able to raise capital from long-term supportive shareholders. 

‘You do have long-term support, because institutions have assets they need to invest.’ 

Morse said he was ‘optimistic’ about 2023. He added: ‘I think the City is a very strong place and always does find solutions. It changes all the time.’