Positive signals for UK equity market
The announcement of twelve IPOs in the last week and a survey that finds more investors ploughing money into equity are tentative but definitively positive signs for the UK equity market.
Two of the dozen IPOs raised more than $1 billion: the $1.35 billion offering from Russian conglomerate Sistema and $1.4 billion float by US chemicals company Huntsman. And a $360 million IPO from Korean company Kumho Tire in London and Seoul was the biggest Korean listing for three years. Other London listings came from Greek company DryShips, IGD in Italy and Carter & Carter in the UK.
At the same time, a survey by Merrill Lynch has found that investors are ramping up their equity allocations in expectation of increased corporate borrowing and M&A. Respondents said they had become bullish on equity since last April as the spreads for bank lending and corporate bonds began to narrow substantially. This is despite the outlook for earnings and corporate performance in 2005 being benign at best. Investors said they believed equity would still rise as leverage increased, either through dividends to shareholders or acquisitions.
The FTSE 100 breached a psychological boundary last week when it passed 5,000 for the first time in two and half years.