French Stock Exchange
Previously known as Paris Bourse, Euronext Paris in France is the country’s securities market. In September 2000 the Paris, Brussels (Belgium), Lisbon (Portugal) and Amsterdam (Netherlands) exchanges combined to create Euronext NV.
Funding Investments on the French Stock Exchange
France offers investors several ways to fund investments, depending on the types of trades they wish to make. For example, Euronext Paris oversees the operation of MONEP and MATIF SA. MONEP handles options as well as equity and index futures. MATIF SA is a futures exchange. Derivatives traded previously on MATIF are now traded on LIFFE Connects. The Nouveau System de Cotation (NSC) is the system used for trading Euronext Paris investment products.
Reviewing France’s Equities Market
The equities market in Frances consists of three parts:
- The Premier Marche
- The Second Marche
- The Nouveau March
Let’s Look at What Each of these Categories means to investors.
The Premier March was called the Official List at one time, and features a large listing of large local and international companies.
The Second Marche deals with companies medium in size.
The Nouveau Marche includes fast-growing businesses that require capital to expand.
One other list, the Marche Libre, features securities that cannot be included on the 3 above-mentioned lists. This market is non-regulated.
Euronext Paris presides over the calculation for the CAC40 Index (similar to the Dow Jones Index in the U.S.), the MIDCAC Index, and the SBF-FCI Index. Components of the real time CAC40 Index are included in the SBF Index. The MIDCC Index makes up the top 100 most liquid stocks on the Nouveau Marche and Premier March listings.
Investing in France
Indeed, France offers investors with some interesting ways to make money. This can be accomplished, as France is home to almost 40 of the world’s 500 largest companies. The country is the base for some of the biggest airlines, insurance companies, cosmetic firms, luxury corporations, and energy companies in the world. As a result, France is also a great place for investing, particularly if you are interested in international investing opportunities.
If you wish to invest in companies in France, again, you have several ways you can do so. For example, you can choose from exchange-traded funds (ETFs) or American Depository Receipts (ADRs). Because of its large economy, France is a relatively safe haven to direct money. However, the sovereign debt of the European Union (EU), adds to the investment risk.
So, what is sovereign debt?
Defining Sovereign Debt
Also referred to as national debt, sovereign debt is a country-owed debt – an obligation that a country owes its domestic and international creditors. It can be categorized as public debt or intra-governmental debt, both which come about from a country’s borrowing activities.
The debt can increase, in some cases, because of a country’s fiscal policy. The sovereign debt gives rise to a country’s financial health, or how collective countries, such as the EU, is managing its debt. While you can use different metrics for figuring sovereign debt, it normally is based on a place’s gross domestic product (GDP) and the amount of public debt that it has incurred.
With that being said, you will find the France Stock Exchange showcases a well-developed securities market – one that offers less geopolitical volatility and risk. Plus, the country is home, as mentioned, to some of the world’s larger companies. These types of companies feature lower volatility and therefore longer and more predictable earnings power.
When it comes to investing in stocks on the France Stock Exchange, you need to consider, then, the country’s participation in the EU. France is the third largest member in the European Union, which means that it may be called upon to fund most of the bailout money, if needed. The recent sovereign debt crisis in Europe showed that this type of liability was evident.
Plus, you need to consider France’s tendencies, politically, toward socialism when deciding to invest in stocks or other products through the France Stock Exchange. For instance, employees work 35 hours per week and the retirement age is 62 – much lower than other similarly developed countries.
Investing in France – Choosing ETFs
If you still wish to fund stocks on the France Stock Exchange, you may want to consider investing in exchange-traded funds, or ETFs. The funds provide investors with a simple answer to building a diversified portfolio of France-based companies. Because they hold several securities over many industries, the funds are deemed less risky than buying individual stocks. Also, unlike mutual funds, ETFs can be traded at any time, just like the shares of stock on the France Stock Exchange.
So, what are some of the popular ETFs featured that back companies based in France?
Popular French-based ETFs
You might want to consider the following investment options if you are an international or French-based investor living in the U.S.:
- The MSCI France Index (NYSE: EWQ)
- SPDR DJ Euro STOXX 50 (NYSE: FEZ)
- The MSCI EMU Index Fund (NYSE: EZU)
- Europe AlphaDEX Fund (NYSE: FEP)
These stocks allow you to invest on the NYSE without buying the stocks directly on the France Stock Exchange.
Investing in French-based Companies through OTC ADRs
As previously noted, you can also invest in American Depository Receipts (ADRs), which allows you to directly invest in France via the Euronext Paris. While you can invest in a large number of ADRs, many of these investment products trade on the Over-the-Counter U.S. marketplace as pink sheets, which means they are less liquid than stocks traded as public issues via the France Stock Exchange.
ADRS may represent stocks of fledgling companies, or stocks of companies that do not want to file the paperwork needed to present themselves in an official or public capacity. Examples of ADRs include Veolia Environment (VE) or GDF Suez (GDSZF). OTC stocks that enable you to invest in France are most frequently featured and traded on the New York Stock Exchange (NYSE). Many of these stocks cover pharmaceutical offerings or tech-based businesses.
The best way to familiarize yourself with French stocks is to review the France Stock Exchange yourself and research which stocks are trending and which stocks are the best bets for international investors. For each stock you consider, review the management of the company, the business’s prior earnings history, and the firm’s overall credibility among customers. Monitor stocks on the France Stock Exchange to get a feel for the activity among the stocks or ETFs you like.
What do you think about this type of trading? Do you feel France features some stocks that are good additions to your international investment portfolio? What countries and their stocks do you like the best? What do you think about ADRs and ETFs? What about liquidity? You need to answer all these questions before you delve into funding French companies, or managing any shares on the France Stock Exchange.