I reckon the markets are punishing UK listed small/mid caps for the relatively poor response to COVID-19. Compounded on top of the Brexit related SP underperformance, this has pushed valuations even lower. But,
What about foreign companies in AIM or All-share who have no operations in the UK? I’ve looked at Airtel Africa (LON:AAF), Opg Power Ventures (LON:OPG), Mti Wireless Edge (LON:MWE), Hochschild Mining (LON:HOC), Raven Property (LON:RAV), Jubilee Metals (LON:JLP)
Any further suggestions?
Generally I agree with your first paragraph. But often foreign companies on aim have a poor reputation due to being unreliable, unpredictable, risky, subject to exchange rate movements. They are cheap for a reason. The reason being that they often disappoint.
If you look at the UK from outside the UK then you see a currency that is no longer a reserve curency; i.e. it is no longer a reliable store of long term value; the GBP swings with political events and moves quite significantly with risk-on and risk-off movements. The UK market is also dominated by cyclical companies (oil, miners etc) and has few of what are currently termed 'secular growth stocks' - which makes the main UK index complicated and therefore unattractive. If you are outside the UK a rhetorical question might be: does the UK equity market matter?
If you are inside the UK the currency instablity does not matter so much - as your long terms expenses are in GBP. All the same, the long term erosion in the value of sterling means that many UK investors have come to realise that it is better to have a mix of GBP and global investments. When you combine this with the fact that in the UK high growth SMEs tend to be taken over into foreign ownership you see relatively few quality high growth mid-cap stocks in comparison with other markets.
Which begs the question: what is the UK market good for? Swing trading in cyclical stocks, long term investment in efficient closed ended trusts, innovative small caps, access to global markets - all within progressive, tax efficient 'wrappers' (i.e. ISAs, VCTs, EIS etc).
The UK: Use it for those things that it is good for?
I agree that AIM has been abused by unscrupulous foreign companies and can understand why many investors give them a wide berth. But this means the AIM survivors are trading at a discount, one that has been widened further by Brexit and Covid-19. Airtel Africa (LON:AAF) is in the FTSE250 but is a rarity in that index. Given the parlous and weakening state of UK finances, I’m comfortable with the FX exposure to certain EM currencies e.g. Rouble & Indian Roupee
