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IPE special report May 2018

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Fund managers relieved as Rutte triumphs in Dutch elections

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The financial sector has responded with relief to the outcome of the Dutch elections, with the liberal VVD party of prime minister Mark Rutte the clear winner.

Geert Wilders’s populist Freedom Party, PVV, gained less than expected.

VVD’s current coalition partner, the labour party PvdA, has largely collapsed – dropping 29 seats to 9. This opens the way to a new centre-right government under Rutte, likely to be supported by the Christian democrats, CDA, and the liberal democrat party D66.

“If this is the case, it won’t impact our view on European financial markets,” commented Lukas Daalder, chief investment officer of asset manager Robeco. “If Rutte can continue as prime minister, Dutch politics would be a source of stability, rather than disruption.”

The euro rose and spreads in euro-denominated bonds declined on the back of the election outcome, Daalder said. He noted, however, that yesterday’s rate hike from the US Federal Reserve may have been the dominant cause.

Anna Stupnytska, global economist at Fidelity International, described the election result as “good news”.

However, she warned that a long negotiating period for a new coalition government was likely, “which would not be helpful for a Greek bailout review”, which is ongoing.

A new government coalition would need at least one smaller party – in addition to VVD, CDA, and D66 – for a majority.

The most likely candidates are the small religious right party CU, which won five seats, and the green-left party GroenLinks, which more than tripled its number of seats to 14. Although tough climate measures are a key element in GroenLinks’s manifesto, it hasn’t excluded co-operation with the VVD.

Ruth van de Belt, senior investment strategist at Kempen Capital Management, concluded that the election result gave investors breathing space ahead of the presidential elections in France. She said Kempen expected Le Pen to lose from Macron in the second round, and also indicated that the asset manager didn’t anticipate early elections in Italy.

“With the cloud of uncertainty lifting, this makes European equities very attractive,” Van de Belt added.

Antoine Lesné, EMEA head of exchange-traded funds strategy at State Street Global Advisors, said French government bond spreads might tighten a bit, as the Dutch election was seen as a temperature check for the French elections, which start next month.

Columbia Threadneedle Investments, however, was more cautious and pointed at the increased fragmentation of the political landscape, and the fact that Geert Wilders – who gained 20 seats in the 150-strong lower house – will remain as a critical opposition voice.

Pension managers APG and PGGM, as well as pension funds ABP and BpfBOUW, declined to comment on the election result.

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