Whatever the hard-nosed investment case for the coming slate of UK government privatisations, ALLNews sees one clear benefit. Royal Mail, Lloyds and RBS will make London equities just that little bit more British again.
It will be comforting to see a company with a name like Royal Mail joining a market that was becoming better known for the likes of Bumi, Kazakhmys, and Eurasian Natural Resources Corporation.
Margaret Thatcher was “not prepared to have the Queen’s head privatised”, but many private investors will be well pleased.
More than 80% of Royal Mail’s revenue comes from the UK. Lloyds TSB and Royal Bank of Scotland, under pressure from the UK government to slash their overseas operations in favoured of UK retail and SME lending , are headed the same way.
Investment advisers are fond of telling pension trustees that UK blue chips provide all the international diversification a retirement portfolio could ever need because so many global stocks reside in the FTSE 350.
But just as grab-bag conglomerates in the Hanson mould have lost favour with investors, so too perhaps diversified national equities markets.
If British investors want exposure to the US or Asia, most are perfectly capable of doing so themselves. It is true that buying into Indonesian coal or Kazakh copper is a little more difficult, but as they say, if it were easy, everyone one would do it. Not necessarily a good thing.
Even admired companies such as Apple are under pressure to return cash to shareholders, rather than spending it on not sticking to their knitting. Investors given a dividend can create their own diversification by supporting the next Apple in the making.
The clearest recent illustration of the diversification discount applied to modern holding companies was the 60% rise in the shares of News Corp. after Rupert Murdoch capitulated to shareholder pressure to split its film and television interests from its print publishing properties, creating 21st Century Fox and new News Corp., respectively.
Could UK shares benefit from a similar re-rating were they to become more of a pure punt on the British economy for index trackers? Or would this newly patriotic London market be seen as a Bad Co. in terms of global asset allocation?
Either way, the investor would have a clearer choice.
A friend of ALLNews works for the Royal Mail as a financial analyst. Normally, he sits in an office crunching numbers like so many fellow graduates employed in the City.
But for a few weeks each Christmas, he and other Royal Mail desk jockeys duck into a pillar box and transform themselves from Dilbert into Postman Pat. As they take to the streets of Britain with their vans and push-trolleys to deliver parcels, they contribute to the real economy of the nation in the most hands-on way possible.
We need more of that in the FTSE.