The AIM market, the platform for smaller UK companies run by London Stock Exchange Group PLC (LSE:LSEG), continues to underperform in 2024, according to a new report from Shore Capital.
The broker's annual examination, unlike other major indices, highlights that London's junior market index remains down for the year, reflecting broader challenges in the UK economy and persistent investor concerns over a mooted change in tax treatment for AIM shares.
Analysis by Shore Cap points to several factors contributing to AIM's weak performance. Among them are concerns about the upcoming Budget and potential changes to inheritance tax, which could further weaken demand for stock and is currently acting as a cap to performance.
Additionally, the easing of listing requirements on the UK's main stock market, the Official List, could draw potential new listings away from AIM, further dampening its prospects.
While global bourses such as the US S&P 500 and Germany's DAX have hit record highs in 2024, UK equities overall have struggled, with AIM being hit hardest.
The report notes that while many UK stocks remain undervalued, the steady outflow of investor capital from the UK market has exacerbated AIM’s underperformance.
This sustained weakness in the growth market has been a trend for several years, Shore added. Smaller UK companies have faced challenges in attracting investment, as fund managers have been forced to sell UK equities to meet redemption demands from investors, rather than reinvesting in the domestic market.