Ah, France! A beautiful country located in the heart of the Eurozone, famous for its fine cuisine, vintage wines, high fashion, breathtaking landscapes and architecture that is second to none. Paris, a city of love and lights, is always ready to greet myriads of travellers, making France one of the most popular tourist destinations on Earth.
However, the country keeps continuously attracting not only sightseers, but also hundreds of thousands of international investors and traders who are looking to diversify their portfolio with public majors listed on the Paris stock exchange.
France operates some of the largest insurance, cosmetics, luxury, airline and energy businesses, making it one of the most attractive investment destinations worldwide for many, particularly in Europe.
In this article, we find out what investment opportunities Euronext Paris can offer you today.
French economy outlook: surrounded by the unknown
France has always been one of the EU’s most economically and politically influential member states. The economy of France is characterised as diversified, highly developed and free-market-oriented, known to be the world's 7th largest economy by 2019 nominal figures and the 10th largest economy by PPP figures. For the past few decades, the country enjoyed the strong economic performance, backed by good GDP growth, large export capacity and good social outcomes.
However, according to the latest report from the OECD, things have recently changed. The French economy stopped growing as quickly as it needs to, having a destructive effect on job prospects, living standards and overall well-being. Government spending accounts for more than half of total domestic output. The budget has been chronically in deficit and will have to be cut.
It is expected that France’s economic report of 2019 will show a slowdown, as chronic Brexit-related worries, ongoing global trade tensions and lacklustre growth across the EU hit the external sector. However, the aviation and shipbuilding industries are believed to boost exports, while household spending should cushion the slowdown, as a tighter labour market and tax cuts stimulate consumers’ purchasing power.
The current economic forecast may look quite challenging, with business stagnation risks in place. However, it is important not to develop a recession mindset and use economic challenges as a good motivator for innovation and change.
As of September 2019, France has 57 companies on the Forbes Global 2000 list, ranking sixth ahead of India and behind Germany.
The Paris Stock Exchange: the beginnings
Historically known as the Bourse de Paris, the Paris Stock Exchange is the largest exchange in France, tracing its roots of origin back to 1540 when its predecessor, the Lyons Bourse, was established.
In the early 19th century, the inception of the new Bourse de Paris marked the beginning of the modern era of the country’s financial markets. Whereas the resemblance to the old, monopolistic Parisian marketplace was obvious, the new exchange was considered a "public" place where securities could be traded.
Almost two centuries later, a period of systemic reforms started. In the 1980s, in order to keep pace with global market developments and compete with another Europe’s major – the London Stock Exchange – the Paris Stock Exchange had to integrate computer trading systems into its operations. It became a fully electronic marketplace by 1998.
A year later, France's four key financial institutions, the SBF, Monep SA, Matif SA and Société du Nouveau Marché, merged into a new company, known as the Paris Bourse SBF SA. With this new establishment, trading activities involving stocks, bonds, commodities and derivatives were available on one exchange.
The Bourse de Paris stopped its existence as an independent financial marketplace in 2000, after merging with Brussels and Amsterdam exchanges to create the first-ever pan-European exchange, known today as the Euronext N.V.
Euronext Paris: a part of a whole
Ever since, the Paris Stock Exchange has been known as Euronext Paris, one of seven consolidated exchanges included within the Euronext marketplace. As a whole, the Euronext exchange is colossal in size, making it one of the global leaders of trade.
Listing over 1,500 companies worth €4.1 trillion in market capitalisation as of end July 2019, Euronext is the largest capital market in continental Europe. Apart from cash and derivatives markets, it offers listing market data, market solutions, as well as custody and settlement services.
Today, Euronext has 7 major subsidiaries: Euronext Amsterdam, Euronext Brussels, Euronext Paris, Euronext Lisbon, Euronext Dublin, Euronext London and Euronext Oslo. The latter was acquired in June 2019.
Euronext Paris offers a plethora of financial instruments to invest in, including stocks, bonds, commodities, indices, ETFs, warrants & certificates and derivatives. It has the largest number of listed companies throughout the entire Euronext market. The names of many of them are widely known, including L’Oreal, Christian Dior, Danone, Renault and Peugeot. The exchange also calculates the world-renowned CAC 40 Index.
What are the French stocks to invest in?
If you browse Euronext Paris, the chances are that you will find a large number of attractive stocks to invest in. However, when making an investment decision, don’t forget to consider your personal preferences, trading goals, strategies and risk tolerance.
French stocks are divided into 3 main sections:
The Premier Marche, listing large French-based and international businesses;
The Second Marche, listing medium-sized companies;
The Nouveau Marche, listing fast-growing startups.
The list of the French publicly traded companies is rather extensive. The leaders in terms of market capitalisation include a multinational luxury goods conglomerate LVMH (€184.558 billion), cosmetic giant L’Oreal (€138.461 billion) and oil and gas company Total (€127.25 billion).
In the background is a wealth of other publicly traded companies from different industries, presented by Credit Agricole, Worldline, Rothschild & Co SCA and Bnp Paribas in financial services; Orange, Iliad and SES SA in telecommunications; Airbus, Safran and Thales is aerospace and defence; Danone in food processing; Biomerieux and DBV Technologies in biotechnologies; Ipsen and Sanofi in pharmaceuticals; Korian Medica in healthcare; Vicat in construction; TechnipFMC in oil and gas; Rubis, Vallourec and TechnipFMC in energy solutions; Arkema in chemicals and Gaztransport et Technigaz SA in engineering.
Don’t forget about the world-renowned tyre manufacturer Michelin, multinational automobile producers Renault and Peugeot, as well as about luxury retailers Hermes International, Christian Dior SE and Kering.
If you are not the type of person who wants to track the performance of each individual stock, you can try investing in the large stock indices. In France, the CAC 40 Index is a great example.
This French index comprises the 40 largest equities listed on the Euronext Paris in terms of market capitalisation and liquidity. As the key Paris stock exchange index, it serves as a benchmark of the French equity market as a whole. The composition of the index is reviewed quarterly by an independent committee.
On December 31, 1987, the CAC 40 was launched with a base value of €1,000. After hitting an all-time high of almost €7,000 during the dot-com bubble in 2000, the index dropped to around €3,000 during the economic crisis in 2011. It then gained an upside momentum, recovering to €5,000 in 2017 and 2018.
How to invest in France
Those looking to invest in French shares or other assets have several options to consider, ranging from purchasing stocks directly through a licensed broker to buying exchange-traded funds (ETFs), such as MSCI France Index ETF, iShares MSCI France ETF or SPDR DJ Euro STOXX 50 ETF.
However, while threats of a global trade war and political and economic uncertainties in Europe are slowing the country's growth, you may not want to make long-term investment commitments. Instead, you can try to profit from the price fluctuations in the French stock market through contracts for difference, or CFDs.
Trade France 40 - FR40 CFD
CFD is a type of agreement made between a broker and a trader regarding the price difference between the security’s value at the start and at the end of the trade.
You don’t buy the underlying asset when trading CFDs. Instead, you deal only with the price of a given financial instrument. It is especially favourable when trading international assets, as CFDs provide you with the opportunity to go long or short without the need to deal with conventional exchanges.
However, as CFDs are a leveraged product, losses, as well as winnings, are magnified.
Browse Capital.com to learn the latest information and trade French stock CFDs. Learn more about CFD trading with our comprehensive free online courses. You can also check our guide to share trading to equip yourself with all the knowledge you need.