A recent report from Reuters disclosed what many of us have been speculating on for a while: Euronext Paris has overtaken the London Stock Exchange as Europe’s most valuable stock exchange by combined market capitalisation.
According to data sourced from Refinitive, France’s CAC All-Shares Index is worth around €2.9tn (£2.5tn), compared to London’s FTSE All-Share index, which is valued at around €2.65tn (£2.3tn).
Luxury brands dominate the Paris exchange: Moët Hennessy Louis Vuitton (LVMH), L'Oréal and Hermès International comprise the three largest stocks, while Kering – the owner of Balenciaga, Bottega Veneta, Gucci, Alexander McQueen and Yves Saint Laurent – takes the 10th spot.
A rebound in Chinese demand for these discretionary goods, combined with a stronger euro on the foreign exchange markets, have contributed to the coup, although political friction in the UK has also helped.
Post-Brexit fund drain
Fund outflows from UK-listed stocks have greatly increased since the vote to leave the European Union, according to the data.
In 2022 alone, outflows have totalled €23bn (£19.9bn) so far, compared to €18bn in 2021.
While outflows were comparatively low between 2018 and 2020, and net positive in 2017, over €14.5bn exited the London stock market in 2016.
In comparison, fund outflows from Paris-listed equity positions totalled between €1bn and €5bn over each of the past four years.
Discount rates on UK stocks compared to the MSCI World Index (which represents large and mid-cap equity performance across 23 developed markets) have also risen sharply in the post-Brexit economy.
From near parity in 2016, FTSE forward valuations are today at a near 40% discount on a price-to-earnings ratio to the MSCI World Index.
But while size sometimes matters, London still remains the investment capital of Europe in many regards.
London leads on IPOs
Despite falling short against Paris on a market valuation basis, London still remains the destination of choice for initial public offerings (IPOs).
According to data sourced from Dealogic, the London Stock Exchange has seen 41 debuts with a total deal value of nearly €1.2bn so far in 2022, compared to the €474mln euros raised in 11 IPOs in Paris.
London listings outperform Paris counterparts– Source: Dealogic via Retuers
These are still grim figures for London, especially coming off the record 2021 IPO bonanza that raised nearly €20bn from over 120 listings.
London IPOs are considerably below the 2019 window, when IPOs declined 39% year on year.
But with global IPOs down over 80% this year, London is hardly an outlier in this regard.
In a boon for income-based investors, UK shares, by virtue of being stacked with high-yielding energy companies, paid more than seven times the amount of dividends compared to French companies.
Lastly, the FTSE All-Share Index has outperformed the CAC All-Shares Index by at least 3% year to date.