Home Business News Cautious optimism for the London Stock Exchange in 2024

Cautious optimism for the London Stock Exchange in 2024

22nd Jan 24 12:06 pm

The future of the London Stock Exchange (LSE) has been up in the air for some time. High profile snubs over the last 12 months have dampened the government message of the UK being open for business.

Arm’s decision for a NY listing was a significant blow. Not even the involvement of Prime Minister Rishi Sunak could sway the minds of the key decision makers (Japanese investor in Arm, Softbank), resulting in the British semiconductor and software company skipping across the pond.

The reasons for this boil down to the comparative advantages offered in New York for both public companies and investors. Opening valuations tend to be a lot higher, triggered by the increased liquidity and intraday capital volumes being traded. Investors can also benefit from lower fees and greater diversification options.

For now, London does not have the pulling power it needs to effectively compete against the US.

This goes against the vision of the UK as an innovation hub, and one that can support the full life cycle of a business, from founding to eventual exit. The solution is to create an exchange that pulls investor interest, attracts new IPO activity from companies in sectors that are generating excitement, and in turn facilitates a liquid market.

After a rocky 2023, some commentators are optimistic about the opportunities 2024 could open for the LSE. From an economic standpoint, interest rates are starting to have a noticeable impact on inflation. Should inflation be effectively curbed, and as prices on the LSE adjust, there could be an opening for investors to take advantage of undervalued stocks in the UK.

Elections in the UK and the US will also offer some much-needed clarity on the direction the countries are heading. Regardless of the outcome, the challenge of not knowing who will be in power this time next year makes it difficult for investors and companies looking to go public to plan accordingly. The elections will provide clarity and guide on any regulatory changes to the LSE that might need to be prepared for.

Overall, the outlook does look cautiously positive for the LSE should inflation and interest rates drop, in turn attracting renewed investment activity. However, the main catalysts will be any big-name IPOs the exchange can attract in the short-to-medium term. Prominent listings serve as a mark of confidence, demonstrating the positive sentiment companies hold towards not just towards the exchange, but the UK more generally.

The tech sector will be at the forefront of this. For the past decade, the UK has effectively positioned itself as a global tech hub for talent, scale-up and growth. Having more examples of UK tech companies listing on the exchange will go a long way, particularly if these companies are from sectors that are already generating hype, like AI and Web3.

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