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London has not lost its crown as Europe’s biggest equities market to Paris - Reaction Life 22.11.22

Article by Maggie Pagano

You will have seen the recent headlines: “London loses its crown to Paris as Europe’s biggest stock market” and “London has lost another status symbol – it’s no longer home to Europe’s largest equities market.”

These were just some of the reports shared around the mainstream press and TV not only in the UK but around the world, from the China Daily to Singapore’s Straits Times to the Indian Express.

Twitter also went into overdrive. Historian Dan Snow, who really should know better, tweeted that while London’s stock exchange survived Luftwaffe raids – and then a rocket in 1945 – the UK did the greater damage to itself through Brexit.

This isn’t a great look for the UK right now, coming after the last few months of pantomime style behaviour from our politicians and a press, fed by hard-core Remainers, delighting in Britain bashing and wanting it to be true that the City as a financial centre is in terminal decline.

Yet these headlines were simply wrong, or at best deeply disingenuous. London has not lost its crown as Europe’s biggest stock market and Paris has yet to take that crown, however much President Macron might love to claim that Paris is the real financial centre of Europe.

So why the headlines ? They were triggered by a Bloomberg article published last week claiming the French stock market is now worth $2.823 trillion, just ahead of British stocks that are worth $2.821 trillion.

More pertinently, the Bloomberg article stated that in 2016, pre-Brexit- UK stocks were collectively worth $1.5trn more than those in France.

The London Stock Exchange has not commented publicly on the Bloomberg report although senior sources claim the figures used by the US media giant are not only wrong but a “distortion” of the real picture. “It’s like comparing apples et les poires,” said one.

According to Refinitiv – the market data arm of the LSE – the total market capitalisation of all companies listed on the London exchange are valued at $6.2trn, nearly double the figure for Paris bourse at $3.7trn making London easily the biggest.

So why the discrepancy in the latest numbers ? Well, as Will Wright of the New Financial capital markets think tank says, “c’est compliqué.”

Here’s why: London is an international market with hundreds of companies which have dual – if not multiple – listings on other exchanges. Many of these international companies have DRs – depositary receipts -certificates issued by a bank representing shares in a foreign company traded on another exchange – as well as many companies which have partial free floats.

Just over a third of all companies listed in London are from overseas while roughly around 15% of companies are dual listed. For example, HSBC lists in London but also on the Hong Kong Exchange.

Yet even if measured by domestic issuers only – excluding DRs – the companies listed on London are valued at $2.82trn which is still more than Paris which was $2.69trn.

Based on those with primary listings only, London is valued at $2.94trn in contrast to Paris at $2.88trn. On the basis of indices, such as the FTSE All Share, London’s companies are valued at $2.95trn while the CAC All-Tradable is $2.69trn.

According to New Financial, even if you focus only on local companies and foreign companies with a primary listing, you get roughly to these numbers: London’s value is between $2.95tn to $3.04tn while Paris is $2.70tn to $3.01tn.

In the case of a company which is dual listed, primary issuances are listed where the primary exchange is for that issuer. The definition of this isn’t a standard one used by exchanges, as some assign primary exchange as, for example, their domestic exchange whereas some assign the exchange where there is the most liquidity.

Bloomberg is thought to have included only actively traded, “primary securities” on the country’s exchanges, using its own indices market capital indexes – WCAUUK for UK and WCAUFRAN for France – for its latest report, so the data would not include the wider range of listings on the London Stock Exchange. Despite several requests, Bloomberg has not commented on how it put these numbers together.

What is correct is that the UK’s royal headgear has slipped a little – not just over the last six years since Brexit – but over the last two decades. There are many reasons for that which we shall come to in more detail but they are not directly Brexit related. It’s also true to say Paris can boast some of the world’s most successful luxury goods companies -those such as LVMH which is worth a whopping E355 billion and Hermes now valued at E155 billion -which have swollen the value of its bourse and have done particularly well in China post-Covid. Sterling’s fall against the dollar has also been sharper than that of the euro, thus boosting the French figures.

Yet however you look at the numbers, London is still the bigger equities market than Paris on just about every metric. If you want to be pernickety, it’s worth looking at other measures – such as IPOs and secondary capital raising. In 2021 there were 4,626 IPOs in London and 718 in Paris. If you go wider into other markets such as currency trading and funds under management then London is still second only to New York as the world’s leading financial centre according to the Global Financial Centres Index ranking. Although London’s rating score has been slipping of late, Paris is in eleventh place.

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Maggie Pagano is editor of Reaction and heads up our Young Journalists Programme. She is one of the UK's leading business journalists and has held senior positions at the Guardian, the Times, the Daily and Sunday Telegraph and the Independent on Sunday. As well as writing about business, she likes to start them too and was one of the founding editors of the Financial News, the highly successful City print and online newspaper which is now owned by Dow Jones. She is a regular columnist for the Daily Mail's City & Business section.

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