Anthony Hilton: Foreign floats face distance obstacle

The Stock Exchange is proud of its success in attracting overseas companies to list in London. More than £10.4bn was raised by overseas companies on the LSE in the first six months of this year alone - a year-on-year increase of 64 per cent.

A total of 194 companies, including those from these islands, listed - 40 on the main market and the others on the Alternative Investment Market. Of the total, 50 were foreign, from 15 different countries, and accounted for roughly a quarter of the entire listing activity.

By comparison, in the period to the end of May, there were just 15 foreign listings on the New York Stock Exchange and Nasdaq combined.

Those running the LSE find this very satisfying, in spite of it being the spur for both New York and Nasdaq to seek to take over their European market rivals.

What gets overlooked is that many foreign companies have found it difficult after listing to keep in touch with key London investors. Technology may allow companies to join a stock exchange on the other side of the globe, but PR, which is an essential part of the post-listing service, represents a serious challenge.

Chi-Med, a company using traditional Chinese medicine to develop modern drugs, is a case in point. Its shares have done poorly since flotation earlier this year, largely because the market expected it to be badly hit by a rule change in China relating to the marketing of medicines.

In fact, the new rule did not apply to the company, but analysts in London do not have access to the amount of data they have when following stocks based in their home market. This created an information vacuum, during which the market assumed the worst and the shares were trashed.

The remoteness of a business from its investors requires more proactive investor relations and PR programmes than needed by a home-based company - but the distance means this is more time-consuming to manage.

This is the big challenge to management. It is paid to run the business, not promote it - but a foreign listing requires that balance to be struck the other way round.

Anthony Hilton is City commentator on London's Evening Standard

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