France’s political upheaval has led the country to lose its spot as Europe’s biggest equity market, less than two years after stealing that title from the UK.
President Emmanuel Macron’s shock announcement of a snap election sparked a rout that wiped off about US$258 billion (RM1.22 trillion) from the market capitalisation of French firms last week. Shares in banks Societe Generale SA, BNP Paribas SA and Credit Agricole SA — all big holders of government debt — lost more than 10% each.
Stocks in the country are now collectively worth about US$3.13 trillion, narrowly losing out to the UK at US$3.18 trillion, according to data compiled by Bloomberg. The CAC 40 Index has erased all its gains for 2024 — a sharp reversal from scaling record highs a month ago.
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“We are in a period where there are no certainties for three to four weeks, and the market could unfortunately become more unstable,” said Alberto Tocchio, a portfolio manager at Kairos Partners.
At the same time, a confluence of factors, including improving global growth and a pickup in merger activity, has made UK stocks popular with investors again. Although the country is preparing for its own general election, the outcome is seen as being more stable with the opposition Labour party leading in polls by a wide margin.
“We like UK stocks for valuation reasons, but also as a portfolio diversifier, given their attractive sector profile,” said Ulrich Urbahn, the head of multi-asset strategy and research at Berenberg. “On top of that, the political uncertainty seems to be higher elsewhere, at least for the moment.”
The FTSE 100 Index has hit all-time highs this year, fuelled by export-reliant stocks such as Shell plc and Unilever plc. It has outperformed the Euro Stoxx 50 Index by far in the past three months, with jet-engine maker Rolls-Royce Holdings plc among the biggest gainers. Source: Bloomberg
