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Cablegate: Euronext Attracts Foreign Investors, Increases

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS PARIS 001824

SIPDIS

SENSITIVE

PASS FEDERAL RESERVE
PASS SEC
STATE FOR EB and EUR
TREASURY FOR DO/IM
TREASURY ALSO FOR DO/IMB AND DO/E WDINKELACKER
USDOC FOR 4212/MAC/EUR/OEURA

E.O. 12958: N/A
TAGS: EFIN ECON PGOV FR
SUBJECT: EURONEXT ATTRACTS FOREIGN INVESTORS, INCREASES
PROFITABILITY

SENSITIVE BUT UNCLASSIFIED, NOT FOR INTERNET

REF: Paris 1822

1. (U) SUMMARY: Euronext, the pan-European stock exchange
operator based in Paris, improved its profitability and
attracted significant foreign investment in 2004. END
SUMMARY.

-------------------------
Euronext Did Well in 2004
-------------------------

2. (U) As of December 2004, Euronext, the pan-European
stock market operator, listed 1,333 companies in the
Amsterdam, Brussels, Lisbon and Paris markets (of which 300
are foreign issuers), with a total capitalization of 1.8
billion euros, up 9.1% compared to 2003.

3. (U) Euronext laid claims to primacy among European stock
exchanges in 2004, with 134.5 million euros in trading
operations and 1,543 billion euros exchanged on its
electronic order book in 2004, a 13.5% increase compared
with 2003. Based on a Pricewaterhouse Coopers report,
Euronext was a European leader on the primary market of
stocks going public, raising 9.4 billion euros or 31% of
funds in Europe. On the international derivatives market,
Euronext-LIFFE, the London International Financial Futures
and Options Exchange acquired by Euronext in 2002, had a
bumper year in 2004, trading 790 million euros in futures, a
14% increase compared with 2003. Euronext also was a leader
in market innovation, launching six new Exchange Trader
Funds ("trackers") in 2004. With 51 trackers, Euronext
accounted for 50% of the European market. That segment got
enlarged with new sectors devoted to private bonds (Iboxx),
Government box (EMTX), and the European real estate (EPRA).

--------------------------------------------- ------------
"Anglo-Saxon" and European Investors Hold 44.2% of French
Blue Chips
--------------------------------------------- ------------

4. (U) According to the Bank of France, the proportion of
non-residents investors, which was 33.4% in 1997, has
significantly increased since then, notably in 2000 due to
mergers and acquisitions initiated by large French
conglomerates and partially funded by swaps of stocks. Non-
resident investors held around 44.2% of the capital of
French blue chips in July 2004 compared with 43.9% in
December 2003 and 42.4% in December 2002. Separately, TLB-
Paris Europlace estimated the proportion of non-residents to
be 47% in 2004, using a survey of 51 companies.

5. (U) Privatizations of French companies in a context of
favorable worldwide market conditions further boosted non-
residents' holdings in 2004. Based on the Bank of France's
survey, non-residents controlled 11 stocks out of the 33
surveyed companies of the CAC 40 (the bulk of the CAC40 blue-
chips' capitalization), notably the energy company Total,
with a stake of 64%, and the insurance company AGF, with a
stake of 72%. By zone or country, Euro-zone investors held
17.6% of French blue chips. "Anglo-Saxon" (French short-
hand for American, British, or Australian) holdings
continued to be prominent (19.6%), with U.S. and U.K.
holdings accounting for 13.1% and 6.5%, respectively. By
sector, non-residents' holdings of French stocks remained
especially high in basic industries (54%) and in financial
institutions (47.2%). Following global trends, non-
residents reduced significantly their holdings in the IT
sector to 39.5% from 55.8% in 2000.

6. (SBU) COMMENT: Part of Euronext's success is due to
improved economic conditions in the markets it serves
(despite the rise of the euro), but part is also due to its
willingness to experiment in creating additional financial
instruments (reftel). Some analysts wonder whether the
increased fo

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