The marked shift into shares within France’s FCPE (Fonds Communs de Placement D’Entreprise) individual company savings plans, is under scrutiny following recent dips in the equity markets, according to Richard Deville, managing director of Watson Wyatt in Paris.
The surge in equity markets over the last five years has prompted a sea change in French investment attitudes, says Deville: “ The money is going much more into shares than into bonds, which is a major shift from where it was five years ago.”
Figures from Watson Wyatt show that between 1995 and 1996 bonds returned almost 6% against a 24.7% total for all equities and 19.31% for domestic equities in FCPE funds.
By 1999, FCPE figures show total equities over one year giving 37.26% returns with domestic shares at 24.41% against a bond dividend of 1.17% for the year.
However, the half-year results for this year show equity returns being sharply buffeted - returning only 8.28% in the six months to June. Domestic equities returned 5.22% for the same period and bonds were up slightly on last year at 1.38%.
Short term money market instruments rose by 2.87% last year and were up by 1.62% by June this year.
Last year the CAC40 rose by 42.10%. Over the first six months of this year it went up by only 8.19%.
The CNO eurozone bond index meanwhile rose by only 0.56% for 1999 against 1.38% to the end of June this year. The TX money market index made 3.23% last year and was up 1.85% by June.
“ Despite the market going down recently there is still an enormous rise in shares in France against that of bonds, “ says Deville.
“ What will be very interesting to see is whether the French will run back to their money market instruments or will they stay on the long run approach. This is something we will see if the market turns down.”