Stock markets: handbagging for Paris does not lift threat to London

Receive free Lex updates

We’ll send you a myFT Daily Digest email rounding up the latest Lex news every morning.

Rivalry between France and Britain goes back centuries. Last year’s seizure by Paris of the crown for Europe’s biggest stock market was a symbolic twist.

London has now reclaimed its bragging rights. The market value of the companies listed in the UK capital totalled $3tn on Monday. That is a whisker ahead of the total value of French shares, according to Datastream. The reasons do little to bolster UK national pride. It reflects flagging designer handbag sales in China rather than a flood of high-growth tech businesses listing in London.

Over three months, France’s CAC All-Share index is down 6 per cent. It was led by LVMH, the largest company, which has dropped by more than twice that. The French index is heavily weighted towards luxury goods, which has been the worst-performing European sector recently. The “revenge” spending that kicked off after lockdowns eased in China has fizzled. The weakness of China’s economy poses a threat, given its consumers are expected to account for two-fifths of global luxury sales by 2030. 

Over the same period, the rally in the oil price since mid-June has helped the energy-heavy FTSE All-Share index hold its ground. The shares of Shell, currently the UK’s largest stock, are up a tenth over three months.

In principle, the London market’s tilt towards high-yielding value stocks should appeal to bargain hunters. The French and UK markets shared the same average price/earnings multiple 10 years ago. Since then, the French average multiple has increased by 17 per cent, while the UK’s multiple has shrunk by nearly a tenth.

But London’s cheapness risks further accelerating its shrinkage. The threat lies not just in the departures of a handful of companies such as CRH or Ferguson that have moved their listings to the US. More important are the acquisition of listed companies by private or overseas companies. Over the past decade, there have been more than £700bn in delistings, over six times the amount raised by new issues, according to analysis by the New Financial think-tank.  

The UK is the only developed equity market to have shrunk relative to GDP over the past 20 years. Edging ahead of Paris does little to solve that problem.