The swathe of foreign companies joining the London Stock Exchange is reducing the value of UK companies listed there and potentially increasing the cost of raising capital, according to major investors.

The Financial Services Authority, which incorporates the UK Listing Authority, is already concerned at companies from overseas seeking London share quotations and is preparing a discussion paper on the subject.  But the Association of British Insurers, representing major pension fund and life assurance company investors, has warned the regulator of the dangers of emerging-market issuers using London to obtain a listing.
    
Many Russian companies have chosen to list on the London Stock Exchange but the ABI points out that the position is confused further by foreign companies seeking secondary listings in London when they do not even have a prime listing anywhere – either in their home country or on another foreign exchange.  
     
Peter Montagnon, the ABI’s director of investment affairs, says: “The market could be left nursing a problem. We need to set the right quality expectations now, not wait until the hangover sets in.”    
     
He says some overseas companies are listing depository receipts in London but allowing advisers to give the impression they have full London listings. “We need proper labelling so investors have no doubt what they are buying,” says Montagnon. “We need to maintain particular quality at the top end of the market which gives us our premium brand.”
     
The implication is that some foreign listed companies – even those in the FTSE 100 – have less good credentials than a UK-registered Aim company that meets all accounting and governance standards.
    
Montagnon added: “Companies that deliver quality should be rewarded in terms of a lower cost of capital. Where a company’s operations are outside the UK and its management and/or controlling shareholders are foreign, investors need a way to discuss issues of concern, just as they would with a wholly British company.”

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