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Relax, China Creates a Cyprus Every Week: LSE Chief

Kiran Moodley, special to CNBC.com
Tuesday, 26 Mar 2013 | 9:39 AM ET
Xavier Rolet, the Chief Executive of the London Stock Exchange
Getty Images
Xavier Rolet, the Chief Executive of the London Stock Exchange

The resurgence in the initial public offerings (IPO) market is a sign that investors are once again growing more optimistic despite flare-ups in the euro zone debt crisis, according to the CEO of the London Stock Exchange.

Xavier Rolet told CNBC that while the past week's events in Cyprus may indicate a reawakening of the euro zone crisis, investors were becoming more and more used to minor setbacks. "The market is getting used to bad news, to this macro political news," Rolet said, adding, "The Chinese economy creates a Cyprus every week. It's not a significant issue, other than messages."

Indeed, Rolet took an optimistic approach to the future of the EU and the euro. "We continue to believe that the euro will hold," he said. "Ultimately, it will strengthen, and more importantly, eventually the competitiveness issue, which is the core reason why the euro has been encountering all these issues, will be fixed, particularly thanks to German leadership.

"So, I think the medium- to long-term prognosis is a positive one."

(Read More: Cramer's IPO Watch: Will Pinnacle Be a High Point?)

An improvement in the IPO market has been around for some time now, Rolet argues, and equities are becoming increasingly attractive."Performance has been outstanding," Rolet contends. "Most IPOs that have come to the market in the last six to nine months are up 15 to 20 percent in some cases. And it points to a significant factor, (which) is that investors today,by and large, are short the real economy."

LSE CEO on Improvement in UK IPO Market
Xavier Rolet, CEO of the London Stock Exchange Group, tells CNBC that British firms are leading London¿s IPO revival.

Rolet says insurance companies and pensions funds are underweight equities, and yet when looking for yield, the government bond market or the commodities market do not offer opportunities for great returns.

Many investors are beginning to now sense there is an opportunity for growth through tech IPOs and small and mid-size enterprises (SMEs),according to Rolet.

"Private equity investors are back into the market, with a view to access and tap into the IPO market," he toldCNBC, while US investors are also back in the fray. "They've been back in Europe for almost a year now. What we're also seeing is there is a substantial amount of capital in the retail sector," he said, pointing to the appetite among retail investors.

(Read More: SEC OK's Nasdaq Payback for Botched Facebook IPO)

Rolet sees the success of the IPO market as part of a strong relationship between SMEs and job growth. Much of the equity rally of the past year, Rolet argues, has come not from the blue chip sector but in the SME space. This growth has been matched by job creation, with SMEs creating 30,000 jobs in the past month alone.

"There are 23 million SMEs in the EU, 4.5 million of them are right here in the U.K. There are 26 million unemployed people in the EU, so think of the power of each one of these SMEs creating a single new job," Rolet said. "And what SME managers all tell us is their number one issue is access to appropriately-priced risk capital, i.e. equities."

While Rolet admits that there is still a long way to go interms o fgenerating sufficient investor interest in the equity market, he believes that the IPO market is going to be the fuel that gradually builds liquidity

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