A tale of two stock markets: how London still trumps Paris for investors

LONDON, Nov 28 (Reuters) – Paris’ luxury stock exchange is now worth more than London’s. But while size is important, there are other indicators that highlight the UK capital’s popularity with investors.

While the UK has seen a bigger exodus from equity funds since 2020 than in Paris, companies have raised more money in initial public offerings (IPOs) in London and more shares change hands daily on British markets.

France’s CAC All Shares Index (.PAX) is now worth nearly $3 trillion, making it Europe’s largest stock market by value, driven by demand for its luxury-retailer blue chips. (.FRCG)

London’s FTSE All-Share Index (.FTAS), meanwhile, is worth $2.8 trillion, according to Refinitiv data.

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Funds flow

So far in 2022, funds investing in UK stocks have seen record outflows of 23 billion euros, according to Refinitiv Lipper, down from about 18 billion euros last year and 14.6 billion euros in 2016, when Britain voted to leave the European Union.

Annual outflows from French equity funds are very low – 2 billion euros this year.

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IPO Destination

But London has been a much bigger destination in terms of the number and volume of initial public offerings, with IPO volumes down 80% this year in Europe and more than 90% in the United States, according to DeLogic.

After recording its second strongest year since 2007 for company listings in 2021, the London Stock Exchange has seen 41 debuts with a total deal value of 1.18 billion euros ($1.22 billion) so far in 2022, more than double the 474 million euros raised in 2011. is more than IPO in Paris, according to Dealogic.

Amsterdam — Europe’s largest center by average daily value traded according to CBOE data — has seen just two IPOs so far this year, totaling 411 million euros, according to Euronext.

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Free float

In a volatile stock-market environment, Paris can count on large private stakes in its companies to provide some stability.

Average free-float for French large caps is around 70% and for smaller companies around 50%, according to Euronext, below London where the average free float of the FTSE all-share index is around 90% of total shares outstanding. For Refinitiv.

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“For an institutional investor from an investability point of view, the amount of free float that’s still out there, the UK is still significantly larger,” said Ben Ladler, global macro strategist at eToro.

Indeed, Paris’ three largest shareholders are private investors: the Arnault family, which owns half of LVMH – Europe’s largest company by market capitalization – the Hermès family, and the French government. In comparison, BlackRock, the world’s largest asset manager, leads London.

In terms of market activity, Amsterdam’s average daily value in October was more than 10 billion euros, with London a close second at 9.4 billion — about the same as Paris and Frankfurt, according to data from CBOE Global Markets.

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Brexit discount

Undermining London is the discount at which the FTSE all-share index trades relative to world stocks (.MIWO00000PUS), which have risen to their biggest since the 1990s since the Brexit referendum in 2016, at 35% on the price-to-earnings metric. .

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Dividends and price returns

Energy-heavy London wins big when it comes to dividends. In the third quarter, UK companies paid out $28.7 billion, more than seven times the total paid in France, according to Janus Henderson Investors’ Global Dividend Index.

London’s FTSE All-Share has also delivered better returns to investors this year. The total annual return for the index is 2%, compared with a return of about minus 6% for CAC All Shares, according to Refinitiv data.

FX matters

It’s also worth noting that currency comes into play when measuring the size of London’s market against Paris in dollar terms. Sterling has fallen about 11% against the US dollar this year, while the euro has fallen about 9%.

($1 = 0.9658 euros)

Reporting by Joyce Alves, Vincent Flesser and Samuel Indic in London, additional reporting by Daniel Lussink in Tokyo and Hugh Jones in London; Editing by Amanda Cooper and Kirsten Donovan

Our Standards: The Thomson Reuters Trust Principles.

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