Derek Pain: Foreign forces' invasion has its downside
No Pain No Gain
Saturday 07 July 2012
More than 50 Chinese companies enjoy a London share quote. Since the first arrived 15 years ago there has been a steady flow of newcomers with eight opting for full listings. Most of the others are on the junior Aim although a handful ventured onto the fringe Plus platform.
Although the new-issue business is down in the dumps, the Chinese invasion appears to be continuing. A number of aspiring groups have their sights on a London presence with a company called Fairy Fox, a clothing group, expected to join Aim this month. It hopes to raise £13 million from a placing but does not see London as its long-term home, indicating that Hong Kong could provide its main listing in a few years' time.
Hong Kong is also the main market for the first Chinese company to arrive in London, Datang International Power. It achieved fully listed status in March 1997 but its shares have experienced an extremely soporific time with most of the trading probably occurring in the Far East.
Globalisation has dramatically increased the foreign influence in London in the past decade or so. It is not only the Chinese that have come to town. Resources stocks from Russia and its former satellites have arrived in numbers and have become quite powerful, enjoying a not inconsiderable input when the Footsie, London's benchmark share index, is calculated.
I must confess I am uneasy about this foreign influx. My attitude is out of step with most investment participants. Overseas companies have for long been part and parcel of the London stock market scene but they have never been as numerous, or powerful, as they are now.
Indeed their influence in the Footsie calculations has produced suggestions that the widely quoted index should be revamped, or at least produced alongside a new index that reflects the performance of the UK economy rather than, say, a commentary on the future prices of metals and oil.
The Footsie was launched in 1984. In effect it replaced the FT 30 share index that was started in 1935 and composed of British companies. Banks were excluded from the original 30 shares selected, perhaps, displaying a considerable degree of foresight in view of the banking behaviour we have witnessed. It is unwise to believe an overseas company, although quoted in London, is restricted to the British rulebook.
It may have signed up to our listing requirements but it is still subject to the laws of its home country or, one it selects. I am also dubious about many of the so-called emerging markets, so beloved by many fund managers. Perhaps, in years ahead, some of these countries will turn out to be long-term winners. There could, however, be many upsets before any hoped-for success materialises.
Anthony Bolton, once the "golden boy" of City fund managers, has so far had to stomach sad reverses in China. Two years ago, he launched the Fidelity China Special Situations fund. The shares started at around 100p, topped 120p and are now 76p. Since its debut the fund has lost about a fifth of its value.
But Mr Bolton, a fund manager for 30 years, still expects it to prosper. He says: "To date the road has been hard but my enthusiasm for this amazing country remains unabated."
The Chinese companies that have sought a London presence have, as I suppose had to be expected, included some losers.
For example the Dongfang Shipbuilding Group arrived in August. The shares hovered near 20p for a time, yet by November had shot to 120p. But, as far as investors were concerned it was not all shipshape and Bristol fashion. By March the price had fallen below 20p after particularly discouraging trading statements. Then Northland Capital resigned as financial adviser and stockbroker to the company, prompting a share suspension. Last month the quote was cancelled.
And the excitement over rare earth elements, needed for some high-tech industries, has given another Chinese group a highly volatile ride. Since the shares of Rare Earths Global arrived at 247p in March they have topped 1,000p but are now down to 323p.
Still, the group, which is in the process of raising a $50 million loan through Credit Suisse, could well enjoy a prosperous future.
Compare with the Independent: See how much you could save by switching credit cards. Compare now
Solar on Schools project offers green investors 'tangible, ethical assets'
easyJet founder Sir Stelios Haji-Ioannou aims to make buying a home easier
Life expectancy calculator will allow people to plan ahead but needs to be handled carefully
Erudio Student Loans row: Graduates fear company will pass on deferred loans details
How to start your own internet business
- 1 Pet cat puts three family members in hospital after launching frenzied attack
- 2 Dylan Tombides: West Ham confirm 20-year-old striker has died after battle with cancer
- 3 24 people applied for the 'world's toughest job', here are their interviews
- 4 Angus Steakhouse: How does tourist staple continue to thrive in today's gourmet market?
- 5 Cover up! Mother told to show less cleavage during Disneyland family trip: 'Are we supposed to wear turtlenecks our whole lives?'
The food poverty scandal that shames Britain: Nearly 1m people rely on handouts to eat – and benefit reforms may be to blame
US Navy christens huge $3 billion destroyer ship USS Zumwalt that appears as a fishing boat on enemy radar
Scottish independence: It is the English who should be on their knees, begging the Scots to vote ‘No’
Nigel Farage fatigue? Half of voters ‘immune’ to Ukip’s appeal
Nigel Farage: I’m taking on the status quo, and the Establishment’s fighting back
'Sinful': Video of British Muslims dancing to Pharrell Williams's hit Happy comes under attack
iJobs Money & Business
£150.00 per week: QA Apprenticeships: This company has been providing on site ...
£221.25 per week: QA Apprenticeships: This company is a well established Inter...
£40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...
£35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...
Day In a Page
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square
A charming four-bedroom house overlooking Burleigh Square Park, close to Thorpe Bay
A three-bedroom farmhouse with a large inglenook fireplace and exposed beams
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds