A market not ours.

An isolated introvert little island we are not. At least as far as the financial market is concerned. New figures from the Office of National Statistics (ONS) show that for the first time, over half of the £1.8 trillion value of the UK stock market is owned by overseas investors. And it is a relatively recent phenomenon. The current 53.2% of non-UK share compares with 43.4% just three years ago and twenty years ago the UK held more than 80% of its value in-house.

The explanation for the growing internationalism of the UK stock market is attributed to global merger and acquisition activity and to a lesser degree the relaxation of ownership rules. What is particularly interesting is that of the whole foreign slice, North America accounts for 48% and Europeans 26%. The next biggest slug is Asian owners with 10%.

Equity holdings by UK pension funds has plunged to an all-time low of 4.7% (the figure was 21.7% in 1998). Henry Tapper of First Actuarial said that tough regulations had forced managers of defined benefit pension schemes to “immunise” the risk of equity volatility “at any cost” and so the movement into safer places such as bonds. Notwithstanding this trend, two other data sets pointed towards more equity investment namely defined contribution pension schemes and the advent of auto-enrolment schemes where equities would feature heavily.

Sounds uncannily like a case of American ponies coming to the rescue again with the Chinese and Indians chasing hard on the rails. Too simplistic of course.

JGS 26 Sept 2103

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