LIVE MARKETS-Buy local: Why British investors need to reclaim their stock market

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BUY LOCAL: WHY BRITISH INVESTORS NEED TO RECLAIM THEIR STOCK MARKET

The UK stock market is facing a startling ownership crisis that's hiding in plain sight. British investors have largely abandoned their home turf— holding just one-third of UK equities — compared to 50%-90% domestic ownership in other major markets, according to Goldman Sachs - and this ownership vacuum has created a self-reinforcing negative cycle.

When domestic investors go missing, UK stocks trade at persistent discounts, making capital more expensive for British companies.

The FTSE 100's price-to-earnings ratio sits at 16.46 —significantly undervalued compared to U.S.'s S&P 500 .SPX at 25.34.

Over the past five years, the FTSE 100 has gained about 67%, lagging the roughly 112% gain in MSCI's gauge of global stocks .MIWD00000PUS over the same period.

For everyday Britons, this means fewer investment opportunities and reduced returns, Goldman Sachs says.

Pension funds and insurance companies that once anchored the market now allocate minimally to UK equities, while households over-invest in cash despite its poor long-term performance against inflation.

Goldman Sachs lists a few policy remedies to fix this issue:

1. Pension reform: Encourage Defined Contribution pension schemes, (which currently allocate just 6% to UK stocks), to increase domestic equity exposure

2. Specialized investment vehicles: Create UK stocks-focused ISAs to channel household savings into British businesses

3. Insurance funds: Allow insurance funds more freedom to invest in public equity markets

4. Reducing restrictions: Lower or eliminate stamp duty on share trading and reduce listing rules and requirements

5. Growth market development: Establish a Nasdaq-style platform for innovative companies to attract both domestic and international growth firms

(Ragini Mathur)

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