J.P. Morgan: Benefiting from the boost of passive funds, re-rating of re-rating of US equities is expected

A part of the reason European companies choose to list in New York is that there is more depth and breadth of investors, according to a JPMorgan analysis, which found that the average discount to US peers for CRH Cement (CRH.US), Ferguson Enterprises (FERG.US) and Linde (LIN.US) — all infrastructure companies — narrowed by 15 per cent in the year before their listings were completed.

The team led by Mislav Matejka said: “The common reasons for international companies to list in the US include deeper and broader markets.” They said: “Another advantage is that US companies enjoy a higher level of passive investment capital due to the popularity of ETFs and index funds.”

True, the benefits of a listing are not immediate. JPMorgan added that more recent examples, such as online gambling company Flutter Entertainment (FLUT.US) and Italian Cesnus (Cnh.US), saw their discounts to US peers widen after switching to New York.

London’s reputation as a listing venue has been hit several times by companies heading to New York. Besides higher valuations, New York is seen as having a more favourable executive compensation environment.