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Why the Market Does Not Care About French Politics

Photo by cuellar | Flickr | Getty Images

Macroeconomic data in France under President Hollande's leadership has been poor, but the French benchmark CAC index has performed strongly and is even on a par with the German DAX, suggesting that local politics are not of great concern to the market.

Despite widespread doubts over Hollande's ability to keep his deficit cutting promises after his first year as President, the CAC is up 20 percent.

(Read More: Hollande One Year On: French-Bashing and 'Communism')

"The CAC is up 20 percent in a year, which shows French local concern is not the main concern for the market. The market is looking to the U.S. and to emerging markets, because we all know that is where growth is going to come from, rather than local politics." Francois Mallet, managing director of Kepler Capital Markets told CNBC on Monday.

Mallet advised investors to focus on international companies rather than those that will be hit by the domestic situation.

"Investors should focus on companies that export a lot, knowing the French situation is unlikely to improve over the next two years," he said.

(Read More: France Says It Is Not Anti-Business)

Founding partner of Alpha Value, Pierre-Yves Gauthier said the CAC has been just as strong as the DAX excluding dividends, despite France's economic concerns.

"We know the CAC, like the DAX is exposed to the world, so to some extent that justifies why there is not so much of a gap," he said.

"It is clear at the beginning of this year and last year, the two indices have worked together. This comparison is excluding dividends in the DAX, which stand to prop up the performance of the DAX," he added.

(Read More: 'Time is Running Out,' Asset Manager Tells Hollande)

Gauthier warned investors about France's car sector, which he said is in very bad shape.

"Really the value in Renault today is its 44 percent stake in Nissan. It is sad to say that excluding the value of Nissan stake, the value of Renault is a negative one still. Peugeot is really on the hook of the French government finances," he said.

In bond markets, France has also performed very strongly, enjoying historically low interest rates.

Jean François Robin, fixed income strategist at Natixis puts this down to the fact France is sandwiched between over-priced Germany and weakened Spain and Italy.

(Read More: France Faces 'Devastating Scandal' as Economy Stalls)

"There is no more fragmentation risk in the euro zone. The good thing about France is that it is a not Germany, which is seen as too expensive and it is not Spain or Italy on the other side, with political problems, it is in the middle of the two and is one of the most liquid markets," he said.

By CNBC's Jenny Cosgrave;.Follow her on Twitter @jenny_cosgrave.

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