Publications featured in include: City AM
The average value traded daily per company on AIM reached an all-time high in January 2021(£685,412), following optimistic news of a swift economic recovery from the Covid-19 pandemic. This figure was 92% higher than that in January 2020.
AIM has benefited from brands such as Boohoo, Fevertree and ASOS which have acted as flagships for the index. These stocks have recovered swiftly from sharp falls in their share price during the Covid crash in March 2020. Investor appetite for high growth companies has played a substantial role in increasing liquidity in the market overall.
During lockdown, online fashion retailer ASOS had a 5x increase in its stock price in just under a year from the market crash last year. Fellow fashion retailer Boohoo’s stock price increased by 116% in the space of three months from its March 2020 lows. Meanwhile, drinks maker Fevertree’s stock price more than doubled from March 2020 to June 2021.
Reforms implemented in September 2018 have also helped boost trading liquidity on AIM. Companies listed on the index from this date have had to comply with a corporate governance code aimed at providing greater investor protection. This formed part of a longer programme of governance reforms that has helped improve the market’s reputation significantly.
Markets benefit from high liquidity as investors can trade stocks without having an outsize impact on the price of that stock. As a result, institutional investors can build up a substantial holding in a company over time or exit a position without a big fluctuation in a company’s share price.
As high liquidity is attractive to investors, investment-grade companies are likely to be more encouraged to list on a market with high liquidity. Adding more of these companies would help further improve AIM’s reputation as a highly credible index for institutional investors.
Dan Hutson, Partner in our London office, comments: “AIM continues to mature and 2020/21 has been a real standout year for the index.”
“Despite the challenges in the form of Brexit and the pandemic, AIM is stronger than ever, driven by the successful market reforms of 2018 and a sharp increase in institutional interest in the last twelve months.”
“AIM’s household-name brands have seen big increases in their trading volumes during the pandemic which has helped boost the liquidity of the entire index.”
“Institutional investors could be encouraged to deploy even more capital on the index with liquidity hitting an all-time high this year. This can help form a virtuous circle, attracting even higher-quality companies to list on the market.”
Even through the traditionally quiet summer, liquidity on AIM maintained its momentum this year. AIM liquidity in August 2021 was higher than in the same month of any previous year in the index’s history. Liquidity in May 2021 was 24% higher than in the same month in 2020.
*Year end is August 31st.