Western Market Exodus: London's Stock Departures Leave Historical Gaps

A wave of stock market withdrawals is shaking London's financial market. This year, 88 companies have either withdrawn from the main London exchange or shifted their primary listings to the USA, while only 18 new listings have been added. This unprecedented net exodus indicates the largest decline since the financial crisis, as new issues remain scarce and bidders increasingly target companies registered in London. Goldman Sachs highlights the causes and effects of this mass movement, known as the "LSExodus," in a detailed report titled 'New York Calling.' A key driver of the trend is the growing valuation gap between British and American stocks. This phenomenon is global; however, the gap is particularly pronounced in the UK stock market, even when taking sectoral differences into account. Research shows that all sectors in the UK are traded at a double-digit P/E discount compared to their US counterparts. A lack of investment in British stocks by domestic capital further amplifies the exodus. With only about a third of the British stock market held by domestic investors, as opposed to over 80% in the 1990s, the imbalance in capital allocation is evident. Strategies to close this valuation gap are limited: new listings, acquisitions, or stock buybacks are in focus. However, these tactics come at a cost, further shrinking the British market and reducing trading volumes. Goldman predicts a continuation of these developments and advises a shift towards more sustainable structural solutions. Ultimately, attention should be paid to the locations of companies, their businesses, and jobs, rather than their stock exchange addresses. Signs of an upcoming revival could bring back capital flows. Looking at Japan shows that even a long-struggling stock market can regain momentum.