From its conception in 1996, Le Nouveau Marché has looked beyond national borders, and now it seems those ambitions are paying dividends.
A significant number of intermediaries and investors active on the market are from other European countries and the US, and any company meeting the market’s requirements may be listed, regardless of its nationality. While it is the larger French hi-tech and internet stocks among the 102 listings which have shown the most dramatic increases in the past month, there is no doubt that this is as a result of international rather than merely domestic interest. Such has been the inflow of funds that the market was capitalised at E6.1bn by mid November this year, producing a 44.6% rise in the NM index, from 1,138.86 in January to 1,828 11 months later.
Le Nouveau Marché is also a member of the EURO NM network, in partnership with exchanges in Brussels, Frankfurt, Amsterdam and Milan. Over the same period from the beginning of this year the EURO NM index has experienced a roller coaster year, but a late recovery has seen a 13.81% increase.
Despite the NM markets being backed by the substantial resources of established European exchanges it is not necessarily this advantage that is behind the growth we are witnessing. Nonetheless, there are substantial advantages for new markets.
Harmonised admission, trading and disclosure rules, access to all EURO NM markets through cross-membership of financial intermediaries, and a common infrastructure for the dissemination of market information, trading and delivery hardly harm prospects.
Nonetheless, there are perhaps other influences at work imparting a greater influence on growth. One of these is unquestionably the joint marketing agreements to promote companies internationally. Nick Maggs at the London office of the Paris Bourse says: “EURO NM
creates a high profile for listed companies internationally and exposes companies to a broader range of investors. It also provides investors with a critical mass of investment vehicles and allows them to act globally and trade locally. “It is this international exposure, together with the decision of NASDAQ to provide a service in Europe, which has resulted in the performance of Le Nouveau Marché, rather than any correlation to the other Paris indeces. “The CAC-40 index has soared through the 5,000 barrier and there may have been some tracking, and takeovers in finance and energy may have been a driver, but I doubt if they are the major causes for the good performance.” says Maggs. Rather, he believes, it is the low costs and high liquidity of the market, the high profile which EURO NM and the recent NASDAQ announcement of an electronic trading exchange in Europe.
Most analysts agree that there is little correlation between the indices and that EURO NM and especially Le Nouveau Marché are phenomena.
Christophe Varloud of Credit Lyonnais in Paris points to the performance of some of the larger capitalised stocks. “People often think of start-up companies when they think of the NM exchanges, but there are some big established companies there too. Take Avenir Telecom, comparable with Car Telephone Warehouse in the UK. Here is a company capitalised at E820m, which is showing an excellent performance.” He points out that it is the information technology stocks and anything related to the internet which are driving the market, alongside hi-tech bio-med stock. “Although telecoms are the big players on national indices, they play a less significant role on the NMs,” he says.
Paul Barlovic of of Paris-based brokers ODDOagrees. “There is a lot of interest from abroad, including Britain and the US, in some of the French stocks which boast a higher valuation. In the past couple of weeks we have seen some massive increases, mainly information stock such as Waltech, but almost every stock related to information technology or the internet has done well.”
Varloud points to NASDAQ as being the major influence on the rise of Le Nouveau Marché. “If it is tracking anything it is tracking NASDAQ. The type of investor the exchange attracts are not initially looking at P/E ratios, but rather betting on the future. The internet is already making a massive impact on the way business is done, and it is clear that neither Le Nouveau Marché nor the secondary stock indeces are being influenced unduly by the CAC-40.” He adds that all fund managers have to follow trends, and that investors are optimistic about the growth of e-business and the internet. “Consequently any stock related to these activities will attract interest.” Barlovic believes there is a more significant influence at work. “People are beginning to make comparisons between French hi-tech stocks and the equivalents on the NeurMart and NASDAQ. The increases we have seen recently indicate that investors are looking at valuations on other listings and making direct ratio comparisons.” He believes that an analysis of other markets suggests a convergence of hi-tech and internet stocks around the Europe and in the US. “Fund managers are aware of the fact that the French stocks were a little late in achieving these valuations, but now we are seeing good flows thanks to acquisitions and the growth of these specialist companies,” he says.
Most analysts see little to stop Le Nouveau Marché as the New Year approaches, and Varloud explains why. “For the first quarter of next year it is difficult to believe that we will see any changes in the current trends. I am very confident about the first few months of 2000, but then we will have to sit back and look at some of the results which the larger companies are posting.” It could be that will lead to a return to the safer waters of traditional industry for some investors, but the past year, especially in Paris, suggests that is unlikely.