EURONEXT ATTRACTS FOREIGN INVESTORS, INCREASES

UNCLAS PARIS 001824 SIPDIS SENSITIVE PASS FEDERAL RESERVE PASS SEC STATE FOR EB and EUR TREASURY FOR DO/IM TREASURY ALSO FOR DO/IMB AND DO/E WDINKELACKER USDOC FOR 4212/MAC/EUR/OEURA E.O. 12958: N/A TAGS: EFIN ECON PGOV FR SUBJECT: EURONEXT ATTRACTS FOREIGN INVESTORS, INCREASES PROFITABILITY SENSITIVE BUT UNCLASSIFIED, NOT FOR INTERNET REF: Paris 1822 ¶1. (U) SUMMARY: Euronext, the pan-European stock exchange operator based in Paris, improved its profitability and attracted significant foreign investment in 2004. END SUMMARY. -------------- Euronext Did Well in 2004 -------------- ¶2. (U) As of December 2004, Euronext, the pan-European stock market operator, listed 1,333 companies in the Amsterdam, Brussels, Lisbon and Paris markets (of which 300 are foreign issuers),with a total capitalization of 1.8 billion euros, up 9.1% compared to 2003. ¶3. (U) Euronext laid claims to primacy among European stock exchanges in 2004, with 134.5 million euros in trading operations and 1,543 billion euros exchanged on its electronic order book in 2004, a 13.5% increase compared with 2003. Based on a Pricewaterhouse Coopers report, Euronext was a European leader on the primary market of stocks going public, raising 9.4 billion euros or 31% of funds in Europe. On the international derivatives market, Euronext-LIFFE, the London International Financial Futures and Options Exchange acquired by Euronext in 2002, had a bumper year in 2004, trading 790 million euros in futures, a 14% increase compared with 2003. Euronext also was a leader in market innovation, launching six new Exchange Trader Funds ("trackers") in 2004. With 51 trackers, Euronext accounted for 50% of the European market. That segment got enlarged with new sectors devoted to private bonds (Iboxx), Government box (EMTX),and the European real estate (EPRA). -------------- -------------- "Anglo-Saxon" and European Investors Hold 44.2% of French Blue Chips -------------- -------------- ¶4. (U) According to the Bank of France, the proportion of non-residents investors, which was 33.4% in 1997, has significantly increased since then, notably in 2000 due to mergers and acquisitions initiated by large French conglomerates and partially funded by swaps of stocks. Non- resident investors held around 44.2% of the capital of French blue chips in July 2004 compared with 43.9% in December 2003 and 42.4% in December 2002. Separately, TLB- Paris Europlace estimated the proportion of non-residents to be 47% in 2004, using a survey of 51 companies. ¶5. (U) Privatizations of French companies in a context of favorable worldwide market conditions further boosted non- residents' holdings in 2004. Based on the Bank of France's survey, non-residents controlled 11 stocks out of the 33 surveyed companies of the CAC 40 (the bulk of the CAC40 blue- chips' capitalization),notably the energy company Total, with a stake of 64%, and the insurance company AGF, with a stake of 72%. By zone or country, Euro-zone investors held 17.6% of French blue chips. "Anglo-Saxon" (French short- hand for American, British, or Australian) holdings continued to be prominent (19.6%),with U.S. and U.K. holdings accounting for 13.1% and 6.5%, respectively. By sector, non-residents' holdings of French stocks remained especially high in basic industries (54%) and in financial institutions (47.2%). Following global trends, non- residents reduced significantly their holdings in the IT sector to 39.5% from 55.8% in 2000. ¶6. (SBU) COMMENT: Part of Euronext's success is due to improved economic conditions in the markets it serves (despite the rise of the euro),but part is also due to its willingness to experiment in creating additional financial instruments (reftel). Some analysts wonder whether the increased fo