The British economy might still be slumbering, but despite what you might have read, parts of the City have woken up. That ought to make for good times on the London Stock Exchange, or at least the company headed by Xavier Rolet which runs the London Stock Exchange, whose markets have been soaring.
Yesterday's pre-close trading statement covered the 11 months to 28 February, and it didn't exactly look pretty. New issues down, capital raisings down, trading volumes down, average size per trade down, number of professional terminals in use, down.
In fact, the only numbers in positive territory came from MTS, the bond-trading platform.
However, the outlook could be somewhat sunnier, and that explains why the shares have been spring-heeled since I last looked at the company at the end of November.
For a start, the predicted shift by major investors into equities, first outlined by Goldman Sachs' Jim O'Neill, who is rapidly approaching guru status, appears to be happening. This has helped to drive a strong performance by the FTSE 100 over the past few months.
A rising market draws investors in, gets them trading, gets them thinking about investing and looking for opportunities – regardless of the torpor in the wider economy.
It is worth noting, anyway, that the FTSE 100 is an international market, with the majority of earnings made by its constituents from overseas.
New equity issuance by companies has picked up since the third quarter amid an encouraging recovery in the London market for initial public offerings, with the company talking up its pipeline.
The LSE has finally secured a deal to buy a major stake in LCH.Clearnet, which sits in the middle of trades to ensure they progress if one side defaults. While regulators want organisations like this to hold more capital, they are pushing for more transactions to go through them, so it should provide a source of growth.
Meanwhile, the long-term outlook for the exchange's technology and software businesses is good.
The other point to note about the LSE is that it still presents an enticing opportunity for potential bidders. Its brand and its control of Europe's biggest equity market make it an attractive target. Lots of bidders have tried and failed, but if its bosses fail to keep up the pace, one will eventually succeed. Which keeps management on their toes.
If you followed this column's advice to hold at 1,025p you'll be sitting on an attractive return. Now 1,306p, they are not cheap at 14.4 times next year's earnings, while offering a modest prospective yield of beneath 3 per cent. But I'd still be holding these shares, and for the long term.
Historically, the LSE has comfortably outperformed its own markets, and conditions are moving in its favour. The price has come off a bit over the last few days, so take the opportunity to buy a few more.
I ran the slide rule over IG with the shares at 449p in October, shortly after Peter Hetherington, its chief operating officer, offloaded 156,012 shares, realising £705,642 and more than halving his stake in the business.
No explanation for the sale was offered at the time I wrote, and I advised it might be a good time to follow his lead. Since then, it is true, the shares have picked up a bit, and the trading statement issued by the group on 12 March was encouraging enough.
While IG thrives on volatility – its clients need markets to be moving in one direction or another to make money on their spread bets or contracts for difference – falling markets aren't necessarily helpful. They sap confidence among IG's clients.
With markets rising, some of that confidence should come back, and that has partly explained a very strong run from the shares, although the economic situation in Europe and the UK is still constraining growth, particularly here.
As a rule I would tend to be cautious about companies whose executives sell lots of shares without explanation. But IG does at least appear to be in better shape than it was when I last looked.
The company's shares trade on just over 15 times forecast earnings for the year to the end of March, with a nice enough forecast yield of more than 4 per cent. So they aren't exactly bargains. I'd only be willing to buy again if the shares eased a little further, although the long-term prospects of the business merit a hold. Consider buying on weakness.
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