Save our Stock Exchange

By THIS IS MONEY
Updated:

 

THE longer the uncertainty over the future ownership of the London Stock Exchange goes on, the less enthusiasm there is in the City for a sale. No one who really matters in policy terms wants a deal with Deutsche Borse or its French rival Euronext.

Big City financial institutions, who in some cases are also shareholders, fear the impact on London as Europe's top market in cash shares and a good place to raise capital if ownership and eventually control drifts across to the Continent - whatever promises are made to win the bid battle.

The Financial Services Authority has spelled out in the clearest possible terms its reservations over future regulation and the operations of the Takeover Panel.

Many of the City's second-line investment banks and stockbrokers are deeply worried that either German or French ownership, even if light touch, will rub out the competitive tax and regulatory advantages of the Aim market where they do a great deal of their business.

Aim represents the most entrepreneurial strain in Anglo-Saxon culture and there is concern that the dead hand of Frankfurt, Paris or Brussels could wreck what has been created.

What is slightly surprising about this is the LSE's own responses. It has bent over backwards to accommodate whatever talks or due diligence that the would-be buyers have demanded.

There is, of course, a fiduciary duty to shareholders to explore all sensible offers. But there also is a requirement to inform investors and question the motives of the bidders, and this is where the LSE has let the City down.

Andrew Hilton, of the Centre for the Study of Financial Innovation, says the LSE is part of the City's infrastructure and has helped make the Square Mile a venue of choice of market users from around the world. Removing ownership elsewhere would concede ground to other financial centres.

It is curious that at a time when companies from the fastest growing parts of the world including China, India and most recently Russia - in the shape of the mobile conglomerate Sistema - are queuing up for a London quotation that the sale of the LSE should even be considered.

The attractions of London as a home to exchanges has been underlined this week by the efforts of the New York Mercantile Exchange to open a trading floor in London for Brent crude oil contracts.

It believes that the City will offer it liquidity in oil dealings and that it will be able to provide real competition to London's International Petroleum Exchange.

The allure of the City as a financial centre could quickly fade if it allows control of the LSE to migrate to the Continent.

Saving our stock exchange is a noble City cause for the politicians to take up in the run-up to the General Election.

Top Team

OF the spin- offs from the old British Gas, BG Group - the exploration and production arm - has by far the most impressive record. The growth in operating profits of 22% over the full year to £1.52bn is impressive.

It shows an ability to generate ever larger income from the North Sea. But BG is also exploiting resources from Kazakhstan to Egypt.

What pleased the market was an upgrading of production expectations to 580,000 barrels of oil equivalent next year, from 530,000.

It is improving assets and ploughing back large volumes of cash into capital expenditure with plans to spend £2.4bn this year and next.

As a result of its history of delivering, its shares are rated at a premium to both Shell and BP.

Being smaller gives it a key advantage in developing countries which often distrust the oil majors.

BG has often been mentioned as a takeover target for Shell as it seeks to replace depleting reserves. This might be a deal worth supporting if the BG team, headed by chief executive Frank Chapman, were welded on to the top of the Shell hierarchy.

Euro puzzle

SOMETIMES financial markets are totally perverse. On a day when the euroland nations reported that growth climbed a paltry 0.2% in the final quarter of the year, the euro climbed to $1.30 on the foreign exchanges and the pound moved up to $1.89.

It is starting to look as if the dollar rally of recent weeks, assisted by President Bush's promises to cut the budget deficit, is over. Indeed, some analysts are suggesting that the euro could hit the $1.50 level by mid-year.

If that turns out to be the case there will be no need for a euroland interest rate increase.

Indeed, there may be a case for cutting rates - something the European Central Bank has resolutely refused to do despite economic stagnation.

• Alex Brummer is the Daily Mail City Editor

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