APRIL 1997
Judging from the index figures one might jump to the conclusion that nothing special happened on AEX Effectenbeurs. After all, the AEX-index rose only half a percent (to 740.99) over the month as a whole, but this development, hardly spectacular in itself, hides enormous price movements which took place as the month progressed. This applied as much to the exchange as a whole as to many individual securities.
In March, turnover on the exchange fell to Dfl. 168bn, a drop of 20.2% in comparison to February. This fall was caused by the 28.4% drop in turnover in bonds, down to Dfl. 85bn. Turnover in shares fell 9.5% to Dfl. 83bn, largely due to 15% less turnover in internationals and 34% less turnover in investment companies.
Turnover in Dutch government loans fell 28.6% to Dfl. 76bn. Practically all the remaining categories also showed decreased turnover.
Compared with the corresponding period last year, total turnover rose 4%, turnover in shares rose 53% and in bonds fell 20%.
In the first half of the month prices indefatigably followed the rising trend set in the first months of the year. Impetus was provided by a continuing confidence that no increase in interest rates was imminent, the positive development in the American dollar and the mainly positive announcements of company results. On 11 March the AEX-index, which started the month below 740, reached its best ever level of almost 775. But this marked the start of a hectic period in which prices dropped see-sawed violently downward. A low was reached at just above 700 after which there was a reasonable recovery as the month approached its end. On 20 March it was even necessary to take measures for dealing with special market conditions, recently introduced, when in one hour the index fell by more than 2%. On that day the index fell on balance by more than 24 points, after the price display had shown a low representing a loss of 35 points.
RISE IN INTEREST RATES
The origin of the turnaround in sentiment largely lay in rising interest rates, both in the United States and in the netherlands. In the course of the month it became clear that a tightening of American monetary policy was inevitable, and indeed the time came when the rates were actually increased, though only modestly. There is however a fear that the possibility of further rises can not be excluded, given the continuing economic growth in the US. Rate also rose in the Netherlands; the Dutch National Bank increased the official tariff by half a point - the first increase in many years - giving as reason the growing weakness of the guilder against the German mark. As it turned out the rate increase had little effect o the price of the guilder.
Interest rates also increased sharply on the capital market. Generally the fear grew that inflation would increase in the Netherlands if the economic situation continues to develop so favourably even though there are as yet few signs of any such increase. This sentiment translated itself into falling bond prices and a 0.3 point rise to 5.3% in the yield on government loans. That this rise in interest rates is more than just a proverbial hiccup is apparent from the fact that various banks have increased their morgage interest rates.
These factors, in combination with the feeling shared by many for some while now that share prices have really risen quiteridiculously high, were sufficient to explain the nosedive taken by many prices. Price falls were widespread in the second half of the month, and only securities which came out with highly favourable announcements escaped a severe fall in price.
FOREIGN EXCHANGES
Developments on leading foreign exchanges were mixed. At first the American exchange seemed to be standing up well, but towards the end of the month telling bloiws fell resulting in a 2% drop in the Dow Jones index over the month as a whole. There was even a loss of 140 points on the last trading day before Easter, and on the Easter Monday the loss continued to increase. The English and more especially the Japanese exchange experienced wild price fluctuations, but both ended the month on virtually the same level as in February, while Frankfurt performed quite outstandingly well, relatively speaking, with a gain of around 5%.
AMSTERDAM
In Amsterdam the internationals performed better than the market average. This was partly due to the continuing improvement in Phillips, which achieved an all-time record price of more than Dfl. 90. By and large investors seem to be happy with the president Boonstra's reorganisation plans. Hoogovens also did outstandingly well, partly because of the co-operation with the Belgium Boel and the improved profit forecasts for 1997.
Financial securities lagged behind the market average, despite the good results announced by various companies in this sector. The rising interest rate probably contributed to this effect. Amongst other AEX securities, Elsevier and Ahold got themselves in the news for foreign acquisitions. Bols Wessanen also received favourable mention after a management report that 1997 should see another increase in profits.
The Amsterdam Midcap index experienced a somewhat greater rise than the AEX index. One important factor here was the publication by Randstad of its annual report, which painted a sunny picture of the future prospects for temp agency business and also announced yet another sharesplit, the second in two years. In consequence Randstad shares shot up to a record high. The price of Cap Gemini, the new name of Cap Volmac, also rose on positive results for the year. As against this, the price of Grolsch, the brewers, suffered a severe blow after unfavourable results for 1996 and gloomy forecasts for the current year.
The exchange will probably soon be losing one of its listed companies now that the building concerns Volker Stevin and Kondor Wessels have announced that they are to merge. As against that, a new name must be added to the already quite long list of potential listed companies: this is Meneba, a company that is to be spun of and is considering an exchange listing in a few years. Finally, the first listing has been achieved on the new Market Amsterdam, the company in question being the software house PolyDoc.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information, please contact:
Lex van Drooge, Amsterdam Exchanges AEX, Tel:00 3120 550 45 40
Paddy Manning, St. James Corporate Communications, Tel: 0171 436 4101
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