- Shein reportedly ready to file listing documents this month
- Exchange boss Julia Hoggett says more floats coming in second half
Reports that institutional investors have been unreceptive to the potential listing of fast fashion chain Shein on the London Stock Exchange are a symptom of the overly cautious approach to risk in the City, the head of a financial markets think tank said.
“You can’t really blame them. They’ve had the risk appetite kicked out of them over the past 20 years by a series of well-intentioned structural reforms to accounting, governance, regulation [and] disclosure,” said William Wright, head of New Financial.
“And the institutional investors are responding to the express wishes of their clients, who’ve had the risk appetite kicked out of them,” he added.
On Thursday, the Financial Times reported that some fund managers with ESG mandates were shunning the proposed listing of the Singapore-headquartered fast fashion chain. Human rights groups have said ethnic minorities in China’s Xinjiang region had been used as forced labour in Shein’s cotton supply chain, which the company has denied.
A listing for Shein would be one of the biggest the London market has seen in years, given that it was valued at $66bn (£51.6bn) in its last funding round. IPOs have been thin on the ground so far this year, with just three listings raising less than £285mn between them in the first quarter, according to EY. However, the chief executive of the London Stock Exchange, Julia Hoggett, said there are “a lot of companies that are now preparing” for a listing as economic conditions improve.
“The reason why we’re talking optimistically about the pipeline is that we can see that happening – and sometimes we see that sooner than the bankers do,” she told the Quoted Companies Alliance conference on Thursday.
Some of these are only likely to take place after the Financial Conduct Authority completes its revamp of primary listing rules, as “there are some companies who need certain changes to happen” before they list, Hoggett said.
“So I do think we’ll see far more [IPOs] in the second half of the year than the first,” she said.
This would be welcome news for a market that continues to experience outflows from institutional investors.
UK-focussed equity funds witnessed their 36th successive month of outflows in May, and the scale of withdrawals was the second-highest on record, according to data provider Calastone. Despite the FTSE 100 hitting all-time highs during the month, more than £1.1bn was withdrawn. This brings the total outflows over the past three years to £22.4bn.
“While buoyant markets usually attract new capital, many investors have seemingly chosen the UK rally as an opportunity to jump ship,” said Calastone’s head of global markets, Edward Glyn.
“What you have is the overall sense of an appetite for risk among core UK retail [and] core UK institutions just isn’t there,” Wright said. “I think it’s hard to blame investors for that, but we have to work out why that’s happened because only by understanding why can you begin to unpick it.”
