‘Making equity great again’ should be the Commission’s priority, says Euronext CEO

euronews (in English)

CEO of Euronext, Stéphane Boujnah, discusses building financial security, liquidity in Europe and the potential impact of a Trump win.

Transcript

00:00Making equity great again, there is more liquidity than ever.

00:03Nobody knows what Trump 2 will be compared to Trump 1.

00:13Welcome to the Big Question from Paris.

00:16I'm Angela Barnes and I'm joined by the CEO of Euronext,

00:21Stéphane Bouchner. Thank you very much for joining us.

00:23Now Stéphane, it's been a very busy year for you at Euronext.

00:26In July, the outcome of the French elections resulted,

00:30as we saw French stocks sliding,

00:33as investors assessed risks from political gridlock.

00:38Do you think France's markets now are over the worst

00:42as a result of the political turmoil?

00:45By all means, I do think so. The worst is over.

00:49There was a moment of uncertainty, which is understandable

00:52because snap elections are not very common in France.

00:55Having parliament is not very common in a French context.

00:58But the world system is navigating through these new political realities

01:05and the markets have understood that in reality,

01:09there was no fundamental changes in the performance of companies

01:13in the overall environment.

01:21In November US elections,

01:23are you concerned about what a potential Donald Trump win

01:27could mean for the markets?

01:28I don't know because nobody knows what Trump 2 will be

01:32compared to Trump 1.

01:33And clearly the sort of momentum created by the Biden economics

01:38and the impressive stimulus program that has been deployed

01:42with the Inflation Reduction Act

01:44is probably going to continue to produce its effects,

01:47its positive effects.

01:48The direction of travel Powell gave at Jackson Hole

01:52was clear indication that we should expect a new stimulus environment

01:56with lower interest rates in the next few months,

01:59irrespective of the outcome of the election.

02:01So honestly, I'm not in a position to characterize

02:04what would be the Trump effect.

02:05What I'm more positive about is that for us as Europeans,

02:10that would mean a lot.

02:11There is a big difference between the sort of Mr. Trump agenda

02:15as he has portrayed it, as he has described it

02:18in terms of relationship with Europe,

02:19in terms of the burden for financing our own security,

02:24the future of NATO, the future of the support of Ukraine.

02:30I mean, all these things will be open for debate

02:33and will create more uncertainty.

02:35So for us as Europeans, uncertainty will be significantly stronger

02:39than what it is today.

02:40And one of the challenges ahead for European markets,

02:44what we've had to deal with,

02:45we've seen in the last couple of years

02:47a lot of European companies opting for a U.S. listing instead,

02:52for example, Birkenstock.

02:53And then recently, we had Total Energies as well,

02:57floating the idea of going over to the U.S. instead.

03:01Are you concerned that we're going to see more companies,

03:05European talent opting for U.S. exchanges over European ones?

03:08And how can we make Europe more competitive

03:11to prevent them from doing that?

03:13So I fully understand this attention focus

03:16on a few companies deciding to move their listing to New York.

03:22But the situation has to be analyzed in a very granular way

03:26because there is a U.K. situation which is specific

03:30and there is a continental Europe situation which is totally different.

03:34So many companies in London are facing a situation

03:37where there is less liquidity in the London liquidity market

03:40than there used to be and are considering moving to the U.S.

03:44to address this liquidity problem.

03:46In addition to all sorts of other reasons

03:49like more cozy CNP approach in the U.S.,

03:55the fact that some companies have very large business in the U.S.,

03:59the fact that an increasing part of U.S. investors

04:05in their share capital table,

04:08all that are good reasons to consider moving to the U.S.

04:11but there is a U.K. situation which is specific.

04:14On the European continent, things are different.

04:16There is more liquidity than ever in the leading market for equity

04:21which is Euronext and there is much more discrete

04:24and smaller number of companies that are considering that situation.

04:28When you refer to Total,

04:30Total has a very specific company valuation problem

04:34because their peers in the U.S.

04:37continue to attract a lot of investors

04:39who are not very much oil and gas scared

04:44because the carbon footprint issue

04:47is not dominating the collective preference of investors in the U.S.

04:53as it does in Europe.

04:54And in Europe, there are more and more funds,

04:57banks that have decided to ban oil and gas from their portfolios.

05:02So there is an asymmetry between companies of the same size

05:05with the same level of profitability

05:06attracting more investors in the U.S.

05:09and fewer investors in Europe in that specific oil and gas sector.

05:19The other thing, the task Europe has on its hands

05:22in the new commission as well with Ursula von der Leyen and Co.,

05:25they have once again put Capital Markets Union top of the agenda.

05:29We know how Capital Markets Union is appealing to businesses

05:33but why is the CMU important to citizens across Europe too?

05:38The fact that we don't have fully integrated capital markets

05:42is just an historical anomaly.

05:44And you have one huge difference between Europe and the U.S.

05:48By and large, if you put aside the U.K.,

05:52obviously in Europe, but let's say in the European Union,

05:55if you want to have some income when you are too old to work, too tired,

05:59you need to, in the rest of the world, you need to buy shares.

06:02This is long-term return.

06:04In Europe, if you want to have some income when you are too old,

06:07you need to hope and expect that young generations around you at that time

06:12will continue to pay taxes and to pay social contributions

06:15because the system is vastly financed through overdistribution.

06:19Addressing the pension structure of Europe

06:23is going to be a fundamental driver to the re-equitization of Europe.

06:28The second thing is that we export a lot of savings to the U.S.

06:33and we re-import equity investment from the U.S.

06:37through private equity investment, large asset managers,

06:41and there is a strong incentive through all sorts of tax schemes all over Europe

06:46to invest in fixed income.

06:48So making equity great again,

06:51since you referred to Donald Trump in your previous questions,

06:54making European equity great again

06:56is probably to be one of the mottos, one of the priorities of the new Commission.

07:01So I'm super enthusiastic, positive, and confident

07:05that the new Commission, the new European Parliament,

07:09and the new Council of European Ministers of Finance

07:14will be very much focused on delivering the Capital Market Union.

07:18Do you think it's incentives,

07:19and do you think there's also a lack of financial education

07:23among the younger generations

07:24about sort of not really knowing how to invest in equity markets, in capital markets,

07:30the fear of losing money?

07:32I'm smiling because the question is about a young generation's financial education

07:38resonates with a reality, statistical reality,

07:41which is the vast majority of the young generation invest massively in crypto assets.

07:47In crypto?

07:48In crypto.

07:49And investing in crypto requires an appetite for risk,

07:52which is significantly higher than buying a share in a blue-chip company.

07:59So in my view, the problem is different.

08:04Historically, before beverage in the UK,

08:08before the reconstruction years across Europe,

08:12before the welfare states,

08:14when people had to plan for rainy days,

08:17when they had a little bit of saving,

08:19they were going to the bank to buy a share in a railway company

08:24or to the post office to buy a government bond.

08:27And that's where they were building a sort of safety net for rainy days.

08:34Then the welfare state came and provided a sort of safety net for everybody,

08:40absorbed some of the resources that went to taxes to provide the safety net,

08:46absorbed through taxes the production of services that became public,

08:51like health and education to a large extent.

08:55And therefore, the approach of savings, stock picking,

08:59which was a part of local branches of banks, disappeared.

09:05We are back, in my view, in a situation where people need to build their own safety net to a good investment.

09:13Actually, there is a slow progress.

09:16We have seen during the Covid year and the year after a progress where retail investments moved from 3%

09:22sometimes to 5% or 6% in some markets.

09:25It was a bit reduced.

09:27I would take the fact that the young generation is massively investing in crypto

09:32as a first step of them being ready for more equity investments.

09:38What is really fascinating is that when you look at who are the new investors in shares,

09:44historically they used to be retired people who had time to do stock picking behind their screen.

09:50There is a significant trend of young generations taking over the old generations in shares investment.

09:58What is your vision for 2025?

10:04Stéphane, do you think 2025 is going to be a good year for listings?

10:10I think it's going to be a better year for a combination of reasons.

10:15The main one is the direction of travel on interest rates.

10:19Interest rates are going to stabilize and potentially decrease.

10:24Clearly, mid-term return on equity will be stronger than on interest rates.

10:31The appetite for the equity asset class will come back big time.

10:36One way of capturing equity risk is definitely to invest in IPOs.

10:44Also, the companies that have matured over the past 10 years in Europe in particular

10:50on the technology sector are now strong enough to consider an exit on markets.

10:58Also, the private equity world is facing more difficulties in raising new money

11:06than they were used to in the past few years.

11:11Exits to markets is becoming more relevant for private equity than it has been in the past few years

11:19where secondary, third, fourth generation of private equity purchasing was the most obvious option.

11:30The combination of private equity being less rich to buy assets from other private equity funds

11:38combined with the fact that interest rates are decreasing

11:44and therefore in relative terms investing in equity is going to become long term more rewarding

11:50combined with the fact that there is an offering of companies ready to go public

11:56combined with the fact that there is a trend for carving out large groups.

12:01We have many large groups that have decided to simplify their organizations

12:05and to carve out some of their operations in public markets.

12:10All these elements make me very confident that 25 will be a good IPO year.

12:15Okay. Stéphane, thank you very much indeed for joining us on The Big Question.

12:19Thank you very much for sharing all of your insights with us.

12:21It's been fascinating and a pleasure to have you on the show. Thank you.

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