The week in investor relations: Strategists back small caps, London reviews trading hours, and a ‘perfect storm’ for research boutiques
- US small caps are expected to outperform larger companies during 2020, according to strategists surveyed by Bloomberg. Four out of five strategists polled by the news service say they expect above-average performance over the next 12 months. Steven Desanctis at Jefferies told Bloomberg his firm expects the Russell 2000 to rise 7 percent next year, compared with a 5 percent rise in the S&P 500.
- The London Stock Exchange has opened a consultation on whether to shorten trading hours, reported Reuters. The move follows calls, including from the UK’s Investment Association, for European trading hours to shorten in a bid to improve diversity and mental wellbeing among traders. Currently, European stock exchanges open for between eight and 10 hours, while US and Asian markets are typically open for six to eight hours.
- The business model of boutique research firms is coming under pressure two years after the introduction of Mifid II, reported the Financial Times (paywall). Since the regulation came into effect, investors have spent less on research and investment banks have slashed their research fees. The result is a ‘perfect storm’ for independent research providers, according to industry group Euro IRP.
- Saudi Aramco, which last week undertook the world’s biggest IPO, saw its shares rise 10 percent on the first day of trading, reported the BBC. The company is listed on Saudi Arabia’s Tadawul stock exchange, which limits daily share price rises to 10 percent. Last week the oil giant raised $25.6 bn, valuing it at $1.7 tn. The strong start was expected after local investors and Saudi institutions were asked to buy shares, said the BBC.
- Strategists at JPMorgan have voiced optimism about the future of climate change-related products despite poor performance to date, reported Bloomberg. In a research note from the bank, the authors said ‘we do think climate change investing belongs in your strategic portfolio’. In May, JPMorgan released a study that found ‘pure-play’ climate change funds had returned 5 percent less than global stocks annually over 10 years.
- The pound has risen sharply after an exit poll suggested the UK's Conservative Party would win a large majority in the country's general election, reported the Guardian. The pound climbed 2 cents against the dollar and strengthened by a similar amount against the euro. Later, it was confirmed that the Conservative Party had won the election, a result which makes it highly likely the UK will leave the European Union at the end of January 2020.