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Lisbon learns from history

In common with its Iberian neighbour, the Portuguese stock market has been enjoying a successful couple of years, following decades of decline towards the end of last century. Indeed, it is the history of the Lisbon exchange that has had a significant effect on its ability to perform well of late.
Founded in 1891, the market traded until 1974 when, in the wake of the revolution two years previously, it was closed. It was not until seven years later that it was able to open its doors to traders again. Since that date, however, the exchange has made significant strides, and is now able to boast a trading and settlement system to match others across the Euro-zone.
Comparisons with Spain are inevitable, and Lisbon has not suffered by this. “Although not able to boast as much liquidity as the Bolsa de Madrid, we have outperformed them in terms of valuation over the past few years,” says Ricardo Sousa of Banco Santander de Negocios in Lisbon.
The growth in equity trading has been significant and is explained by the exchanges spokeswoman Maria João Neves. “The introduction of the single currency, and the emergence of euro-denominated products on the international markets has lessened the attraction of interest rate contracts, thus making equities more attractive in national markets.”
The exchange is keen to widen its range of products, however, and to that end an options market was introduced in March of last year. This at the behest of the 37 members, who provide a management structure through a non-profit organisation.
The current privatisation programme is also having a significant impact on the market. The tranche of Portuguese Telecom stock which came to the market last autumn, proved highly successful. Sousa points to two further issues due later this year. “They will have a significant impact on the market capitalisation,” he said.
Interestingly, the market’s management has not been slow to realise the potential of market-to-market link-ups, and discussions with Euronext are well advanced. Indeed, recently the exchange announced that a deal could be in place within the next six months, placing Lisbon ahead of some of its closest competitors in the race to become part of a pan-European market.
Sousa, however has doubts about how quickly a deal can be in place. “I think it may be unrealistic to talk about such a swift conclusion to the deal. There are a number of issues which will have to be discussed between members and the management, and not everyone is in favour of a swift conclusion. There is no doubt there are moves towards a single European market, and we must be sure that we choose the best option. What happens between Frankfurt and London is obviously of paramount importance, and the smaller exchanges need to have a clear policy on this issue.”

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