Thursday, January 04, 2007
Forget Noah, Aim is keeping well afloat
At the end of a year in which the Alternative Investment Market (Aim) tracked sideways, another pulled float on London's junior bourse had the look of a straw in the wind. When the index was a one-way street, fund managers didn't bother to look too closely at the exotic companies tapping the City for money. Now they are increasingly picky as Noah, a Chinese electronics group, found to its cost yesterday.
With such juicy returns on offer from the market's bigger companies, it's only to be expected that some investors have become sniffy about Aim. Why take the risk of investing in an unproven young business when you can play spot the takeover further up the tree and book an annual return of around 30pc including the dividend.
But as our analysis of the Aim market on our centre pages shows, the alternative market is doing better than its headline performance might suggest. Look behind the average and there's a wealth of investment opportunity. Almost 200 shares rose by more than 50pc last year, so a stock-picker had plenty of chances to beat the index.
The record amount of money raised by Aim flotations last year shows that Noah is the exception that proves the rule. Although there were fewer listings than in 2005, they were quite a bit bigger on average. Who would have thought that Aim raises more money for flotations than either Frankfurt or Tokyo? The success of the market has invoked the ire of American politicians of late who have claimed that Aim is too lax. I'm sure this would have nothing to do with the fact that Nasdaq, America's "growth" market for aspiring companies, has been clearly losing out to Aim in attracting the flotations of international businesses and, of course, is locked in a bitter takeover battle for Aim's parent, the London Stock Exchange (LSE). The LSE bowed to pressure last year and took a look at its rule-book to see if the guidelines that made sense when the junior market was launched in 1995 with a handful of relatively tiny domestic companies still cut the mustard for today's much larger, international bourse.
It wisely took the view that, with a few tweaks, the light-touch regulation that has been Aim's biggest attraction should continue to guide this most successful of markets. There is also the best self-regulation of all for investors to rely on — caveat emptor.
With such juicy returns on offer from the market's bigger companies, it's only to be expected that some investors have become sniffy about Aim. Why take the risk of investing in an unproven young business when you can play spot the takeover further up the tree and book an annual return of around 30pc including the dividend.
But as our analysis of the Aim market on our centre pages shows, the alternative market is doing better than its headline performance might suggest. Look behind the average and there's a wealth of investment opportunity. Almost 200 shares rose by more than 50pc last year, so a stock-picker had plenty of chances to beat the index.
The record amount of money raised by Aim flotations last year shows that Noah is the exception that proves the rule. Although there were fewer listings than in 2005, they were quite a bit bigger on average. Who would have thought that Aim raises more money for flotations than either Frankfurt or Tokyo? The success of the market has invoked the ire of American politicians of late who have claimed that Aim is too lax. I'm sure this would have nothing to do with the fact that Nasdaq, America's "growth" market for aspiring companies, has been clearly losing out to Aim in attracting the flotations of international businesses and, of course, is locked in a bitter takeover battle for Aim's parent, the London Stock Exchange (LSE). The LSE bowed to pressure last year and took a look at its rule-book to see if the guidelines that made sense when the junior market was launched in 1995 with a handful of relatively tiny domestic companies still cut the mustard for today's much larger, international bourse.
It wisely took the view that, with a few tweaks, the light-touch regulation that has been Aim's biggest attraction should continue to guide this most successful of markets. There is also the best self-regulation of all for investors to rely on — caveat emptor.
