The broker argues UK smaller companies remain unloved, undervalued and under-owned, with M&A activity continuing to underscore the valuation gap.
Shore Capital's monthly markets note for April makes the case that UK equities, and smaller companies in particular, remain significantly undervalued relative to global peers, even as the Middle East conflict clouds the near-term outlook for growth and inflation.
AIM was the standout performer in April, rising 10.7% to lead all UK indices, followed by the FTSE Small Cap and FTSE 250.
All UK indices remain in double-digit positive territory over the past 12 months, with the FTSE 100 up 22.2% and AIM up 15%.
The note's most pointed finding concerns the wave of companies leaving AIM for the Main Market.
Shore Capital analysed 13 companies that have made the switch since January 2025 and found that, on average, their share prices fell 5.2% between the announcement of the intended move and the first day of trading on the new market, likely driven by inheritance tax funds selling on the news.
From the date of the actual move to the end of April, however, the average performance was a positive 2.1%.
The conclusion: the market of listing matters less than company quality.
On the macroeconomic backdrop, Shore Capital sees more downside than upside risk to UK growth in 2026, with the Middle East conflict adding to existing headwinds from two successive budget impacts on business confidence and the lingering effect of Trump's tariffs on global trade.
Interest rates are expected to remain on hold at 3.75% for now, with the Bank of England's Monetary Policy Committee having voted 8-1 to maintain in April, with one member calling for an increase. Shore Capital believes rate cuts remain more likely than rises once the oil price outlook clarifies.
The broker counts 10 new mergers and acquisitions in April alone, with bid premiums ranging from 8% to 157%, continuing a trend it regards as the clearest evidence that UK companies are cheap. Intertek, Treatt, Deltic Energy and AnimalCare were among the targets.
Gilt yields, meanwhile, peaked at around 5.1% in April before easing slightly, and Shore Capital expects them to drift lower, which it views as a tailwind for equities.