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Brussels exchanges want to look both ways

Set in the heart of Europe, the Brussels Exchanges (BXS) are faced with a dilemma – do they look outwards to international cooperation, or concentrate on providing a platform for domestic companies and growth enterprises?
Olivier Lefebvre, President of the executive committee of the Brussels Exchanges, has come up with a novel solution: do both.
On the first front the most important steps so far were announced at a press conference in London at the end of last month (see page 29). There it was revealed that the Brussels, Amsterdam and Paris stock exchanges had agreed to merge to create EURONEXT, Euroland’s largest stock exchange by market capitalisation and transaction volumes. The BXS President described it as “a true merger in the real sense of the word”.
Whilst pointing out the aim of attracting some of the world’s largest international institutions to join them, Lefebvre and his colleagues George Möller of the Amsterdam Exchange and Jean-François Théodore from the ParisBourseSBF SA, affirmed they had not forgotten the small investor. “The three exchanges have e-order books, and are very on-line friendly. We want a market place where all players, large and small will be catered for,” said the BXS President.
Lefebvre understands the importance of the exchanges to local companies, but believes that many of those companies harbour international ambition in an increasingly global market. “Our cooperation with other European exchanges shows we are heading in the right direction” he says. “Because of the conclusion of these international partnerships we will be part of a greater whole with the most important partners in Europe.”
He sees the development of this European dimension alongside strong and liquid local exchanges as the key challenge facing BXS during the current year.
He may well be facing a difficult year, as last year the BEL20 seriously underperormed. Lefebvre puts this down to local issues. “The (disappointing) performance was due to the strong influence of higher interest rates on the interest sensitive shares,” he claimed.
It was not until the last quarter of 1999 that the index began to make up some of its losses. By late October it had slipped below the 3,000 barrier but in common with many other exchanges worldwide it saw a strong rally in November peaking at around 3,400. Despite an almost immediate correction, a stronger than anticipated December provoked a recovery to near previous levels. Overall, since the beginning of 1999 the BEL20 rose by a conservative 8.64%. Although turnover increased by 5% quarter on quarter to E14,734m by the end of December, there was little sign of the ‘international’ element anticipated by the BXS executive committee.
Belgian shares accounted for about 90% of activity. Towards the end of the first quarter of this year, the BEL 20 had slipped back below the psychologically important 3,000 barrier.
The junior market EuroNM, while slightly in the shadow of the across city Easdaq, also had a good final quarter boosted by the introduction of Israel-based Unitronics, an internet compatible logic controller manufacturer.
Perhaps the most interesting development of last year was the introduction of a new index participation unit (IPU) shadowing the BEL20. Named the mini-BEL20 and initially aimed at the private investor, the mini is proving to be attractive to institutional investors too. In just a month from its launch almost five million contracts were traded for a total of E156m. Furthermore, it helped boost BXS Derivatives into the top 20 forward exchanges, being the fifth most heavily traded financial instrument world-wide.
Although IPUs have been around in the US and Canada as exchange traded funds, the mini BEL20 is a first for Europe. Based on the domestic index, BXS have plans to apply the instrument to different markets. “In the future we would like to see the mini instrument linked to a general European index, and also perhaps to sectorial indeces,” says Baudouin de Canniere, senior manager of marketing and business development at BXS. He believes that creating a mini-pharmaceuticals or mini-telecoms/internet instrument, and making the concept more international by targeting sectorial indeces, institutional investors will be more attracted to the concept. “We are getting more and more enquiries from international intermediaries,” he says, “probably funds seeking to incorporate a little bit of Belgium in their portfolios, and who would rather do that in the form of a basket rather than by individual stock picking.”
As a first step to cement the international ambitions of the mini, it was matched against the Dow Jones Euro STOXX 50 at the end of last month. “This is a representative European index,” says de Canniere, “composed of the 50 largest market sector leaders covering 10 countries. What will catch the eye of institutional investors who like to track the indices, the EuroSTOXX 50 is a strong performer, rising over 38% last year, and continuing to perform strongly this past quarter. Named the mini-Dow Jones EuroSTOXX 50 the new instrument is aimed at attracting more institutional interest, as well as a global private investors. Frank Van Impe, head of clearing says; “Everything went ahead on schedule, and there may well be more similar instruments launched.”
This enthusiasm was matched by de Canniere. “We have been pleased with the interest shown by the institutions, and anticipate further interest in the new instrument. Our own statistics confirm the breadth of activity in the mini BEL 20 and there is no reason to imagine the new launch will be any different.”
All-in-all it has been a busy month for the BXS and the test now will be whether the twin strategy of the board can be kept on track, and driven to fruition, particularly in the light of the continued under-performance of the BEL 20.

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