London: open to the world

Denzil Jenkins  

Interim CEO, London Stock Exchange

For centuries, London’s resilient markets and institutions have powered the world’s economy.  Through business and economic cycles and amidst times of great change and challenge London Stock Exchange has supported businesses by connecting them with capital.

Listing on London’s markets to finance global ambition has a long and deep history - the longest continuously listed company on London’s markets is Antofagasta, which listed in 1888 to raise capital for building railroads in Latin America. 

London’s DNA is international. It has always been a global financial centre. That is as evident now as it has ever been.

The international hub of finance 

London Stock Exchange is the world’s most international exchange. Over a third of its circa 2000 issuers are international, operating across 100+ countries. Since 2017, the majority of the largest listings on London Stock Exchange have been international issuers, including five of the top ten in 2020. They have ranged from European banks and power companies (NLB, Ignitis) to payments technology in the Middle East & Africa (Network International); from Central Asian fintechs (Kaspi) to North American resources companies (Wheaton Precious Metals, Yamana Gold) and Japanese investment funds (Nippon Active Value Fund), and Chinese investment and insurance firms (SDIC, CPIC). Last year, 52% of new issue proceeds raised on London Stock Exchange were for international companies.

Access to global capital

Another striking illustration of London’s internationalism is that 75% of the revenues generated by companies in the FTSE100 – one of the world’s key indices – come from outside the UK. These internationally active companies are therefore supported by an equally international investor base. Approximately £8.5trn in assets is managed in London, having tripled since 2009. The UK is Europe’s principal investment centre and the second largest in the world1. Uniquely, less than 50% of the equities listed in London are owned by UK institutions2

Companies that list in London do not just tap the UK’s substantial domestic pools of capital, they gain access to capital from around the world. So a company that is seeking to access North American investors does not have to face the additional costs and risks of a North American listing – they can easily do so through London, with over 30% of all London-listed equity owned by US investors.

Issuers list in London to grow globally. Since 2016 London Stock Exchange-listed companies have used their stock to buy businesses in 51 countries3, more than any other exchange in the world, a signal of its status as a universally accepted currency. 

Breadth and flexibility of market structures

Companies of all shapes, sizes and scale can find a home in London because the breadth and flexibility of London’s market structure allows it. London provides the rich soil in which to flourish. Take AIM, which has become the world’s most successful growth market and currently attracts businesses from 75 countries. Over its 25 years, AIM companies have raised £121bn; 38% at admission and 62% through further fundraising, highlighting the long-term nature of support provided by investors to companies on the market. Today, 170 of its 863 companies are incorporated overseas. 

At the centre of the world’s trading day

Of course, one reason behind London’s pivotal role in global finance is its time zone. London stands in the middle of the world’s trading day. It is open from when the Asian markets close, right through to the opening and trading on the North American markets. London overlaps with 27 international markets globally; with more than 70% of all trades occurring during the last two hours of the day when the US markets are open. 

This geographic advantage is underpinned by London’s breadth of securities and the diversity of market participants, its resilient and well-regulated public markets – and by constantly innovating and adapting to the evolving needs of issuers and investors. London Stock Exchange’s resilience was borne out when in the height of the pandemic, it achieved a new record for daily value traded, maintaining robust and orderly markets throughout this period of global volatility4.  

To date the UK’s departure from the European Union has not resulted in a reduction in trading volumes on London Stock Exchange. It remains the pre-eminent Primary liquidity venue in Europe; in January 2021 more than 23 billion shares were traded. In combination, London Stock Exchange and Turquoise account for over 18% of total European trading activity5.

It is still where the world comes to trade – whether that is commodities, swaps and futures, foreign exchange, or in equities and debt instruments. And it rapidly scales to meet new demands: since the first offshore Chinese renminbi (RMB) bond was issued in 2014 by the International Finance Corporation (IFC), London Stock Exchange has become the global hub for renminbi bonds and the leading offshore RMB trading hub outside of Asia6. It is also the world’s largest Masala bond centre, having supported the internationalisation of the Indian rupee from conception. 

Bridging the Asian and North American markets, London enables retail and institutional investors from across the world to trade in an increasingly broad range of securities. So, for example, European and North American institutions can gain direct access to securities from 44 countries in Central and Eastern Europe, Asia and the Middle East through London’s International Order Book (IOB). Some of the most heavily traded securities on London Stock Exchange are IOB instruments, and the IOB is the largest market for Russian instruments outside of Moscow. Through London’s Global Equity Segment, retail and institutional investors can trade in US blue chips and US-listed Asian companies securities in a live market during London hours. 

London’s bond markets

Equally spectacular growth can be seen in London’s bond markets. In 2020 over £500bn was raised on London Stock Exchange through 800 transactions. This is 77% higher than in 2019.

Since its launch in 2017, the International Securities Market (ISM) has over 200 active bonds from 73 issuers located in 23 countries and has raised £74bn in 16 currencies. Bonds from sovereigns including China, Mexico, Chile, Fiji, and Sri Lanka have been admitted onto the ISM. It is a clear reflection of investor confidence in London’s regulatory framework and shows the depth and breadth of London’s international issuer base.

Partnerships 

London’s commitment to open access for issuers and investors brings the world together. Approximately 25% of London’s listed companies are dual-listed or trade on another market7. Some dual listings enable issuers to tap into London’s depth of investor base to complement their local market.

Take Africa, for example. It’s been over 80 years since the first African listing in London8.  Currently there are 123 African or Africa-focussed corporates listed or trading in London, more than on any other international exchange. London Stock Exchange is also a leading global listing venue for African debt, with over 70 active bonds from 20 issuers including Egypt’s $750m green bond - the first sovereign green bond issuance from the Middle East and North Africa – and Acorn’s green Kenyan shilling bond dual-listed in Nairobi and London.

Across the continent, London Stock Exchange works in partnerships with exchanges to help develop local capital markets and increase global investment flows into Africa. In February 2020, FTSE Russell launched the FTSE UK Listed Africa Index to facilitate greater international investment into African companies. As of August 2020, the index had increased in size and now features 70 London-listed companies. 

With these deep and long-standing international credentials and its commitment to openness, London Stock Exchange puts great store on collaboration and recognises its leadership role among the global community of exchanges - chairing the Advisory Group that developed the United Nations Sustainable Stock Exchanges (SSE) Model Guidance on reporting ESG information to investors; and co-chairing the SSE Climate Disclosure Advisory Group to support stock exchanges in providing guidance to issuers on climate disclosure.

Leading the world’s sustainable finance ecosystem

As a global financial centre, London is at the forefront of green and sustainable finance. New initiatives and institutions are emerging, such as the Green Finance Institute, which brings together public and private sectors to design sector-specific solutions that channel capital towards an inclusive, net-zero carbon and resilient economy. As the host to COP26, the spotlight will once again shine on the UK as a hub for the green economy. 

London Stock Exchange is leading the global development of the sustainable finance ecosystem, with a track record for developing first to market solutions in both equities and debt markets. 

The Sustainable Bond Market (SBM) is home to the first certified green bonds out of China, India, the Middle East and first sovereign green bonds from Asia Pacific and the Americas. In equities, our Green Economy Mark is a world-first data-driven green classification and Mark for equity issuers – recognising listed companies and funds which derive more than 50% of their revenues from environmental solutions. The Mark is fast becoming an important benchmark for global investors; 77% of the investor base for green economy companies is from outside the UK. More than 90 issuers on London Stock Exchange have the Mark across all Main Market segments and AIM, including issuers from Israel, Singapore and Australia. 

London’s DNA is global, rooted by its deep ties to the rest of the world and its role as a convener of market participants. With our expertise and focus on innovation, London Stock Exchange plays a key role in driving the world’s economy. Today it is an integral part of LSEG, a leading financial markets infrastructure business, creating new opportunities for our customers. 

References

1. Source: https://ig.ft.com/mapping-london-financial-centre/

2. https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/ownershipofukquotedshares/2018

3. Source: Bloomberg

4. 27 November 2020, daily value traded £12.8bn 

5. https://markets.cboe.com/europe/equities/market_share/market/venue/2021-01-29/#ct=02vrCC&sc=03NrCC&dm=tbpcan&dr=mtd&mt=1&ms=0&hc=1&f=0&ID=d502cc5e45925b6ab776&V=f13d6be573c23e13cfe2

6. https://www.londonstockexchange.com/raise-finance/debt/our-products/renminbi-bonds

7. "https://www.londonstockexchange.com/raise-finance/debt/our-products/renminbi-bonds" https://www.londonstockexchange.com/raise-finance/debt/our-products/renminbi-bonds

8. African Explosives & Industries in 1938: https://www.londonstockexchange.com/discover/our-regions/africa

 

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