"Falling year" for French stocks? Or the worst performance since the Eurozone crisis!

The French stock market has performed poorly this year, likely to achieve its worst annual performance since the Eurozone crisis. The French CAC 40 index has fallen 2.3% this year, while the European Stoxx 600 index has risen by 6%, and the German Frankfurt DAX index has increased by 18.7%. The French stock market showed strong performance at the beginning of the year, mainly benefiting from companies such as LVMH with outstanding sales performance, but this momentum has faded. Political turmoil, weak demand for luxury goods, and concerns about tariffs have led investors to lack confidence in the French market. Roland Kaloyan, European stock strategy director at France's Industrial Bank, said: "There have been too many things happening, and people want to stay away from French stocks. This decline is quite significant." Multiple factors lead to lack of investor confidence Analysts believe that political turmoil has had a heavy impact on the French market. This year, France has already changed four prime ministers, with Franois Bayrou becoming the latest prime minister to take office. Political crisis has intensified concerns about how France will deal with its growing budget deficit. Investor concerns about France's financial situation have pushed up its 10-year borrowing costs to over 3%. The extra spread between French bonds and German benchmark bonds has reached its highest level since the Eurozone debt crisis. Earlier this month, Moody's downgraded France's credit rating, citing "clearly weakening" economic prospects. Luxury companies are a significant part of the CAC 40 index, but their performance has been poor. LVMH and Kering, the two luxury giants, have seen their stock prices drop by 12% and 40% respectively this year. Barclays analyst Emmanuel Cau expects the industry's growth rate to be only 3% next year. He said: "It's been a painful year." Meanwhile, the German DAX index has risen by 19% this year, far outperforming other major European stock indices. Over the past decade, the composition of the DAX index has shifted from being primarily industrial and pharmaceutical to being more reliant on financial and technology companies. This change reflects the transformation of the German economy. For example, SAP stock has risen by over 70% this year, benefiting from the AI boom and the growth of cloud computing business. French companies seek breakthrough, explore other capital markets French banks and insurance companies make up 10% of the CAC 40 index, and their stock prices have dropped significantly due to slowing economic growth and holding a large amount of government debt seen as higher risk by the market. Europe's largest bank, BNP Paribas, has seen its stock price fall by 8% this year. Automakers like Stellantis have also been impacted by weak demand and political turmoil. The company's stock price has fallen by 41% in Paris this year. However, crises also contain opportunities. Some French companies have begun to explore other capital markets. Pay-TV operator Canal+ listed in London this month, although its stock price fell by nearly 30% after listing. Energy giant TotalEnergies has also stated that it is "seriously exploring" the possibility of listing in the United States. Barclays' Cau added: "We need some catalyst to make Europe start paying attention to itself. The world is not so globalized now, and growth is slowing down." While investors often buy on dips, Goldman Sachs believes that the CAC 40 is still not attractive for two reasons: The poor performance of the French stock market is mainly driven by fundamentals, and the fundamentals are still not good at the moment; Compared to historical levels, the current valuation of the French stock market is still relatively high.