Although October traditionally has a bad reputation among investors as the month of the crash the Wall Street crash of 1929 as well as the mini-crashes of 1987 and 1989 all occurred in October the month got off to a flying start on most stock markets. This chiefly reflected investors' favourable expectations of ongoing moderate economic growth and continued low inflation. When, towards the end of the month, the market interpreted comments by Bundesbank officials as indicating that further rate cuts had become less likely, investors started to take profits and share price gains were for the most part wiped out. The sometimes disappointing third-quarter earnings figures published this month also served to undermine prices. The AEX ended the month at 577.02 points, more or less unchanged from the 576.96 recorded at end-September.
TURNOVER TRENDS
Share turnover rose to a new all-time record high of NLG 62.7 billion guilders, battering through the previous record of 58.6 billion guilders.
THE INTERNATIONAL CONTEXT
Internationally all eyes were on Wall Street. Although there was some talk of October trauma, share prices continued their upward climb with the Dow Jones Industrial Index breaking through the 6,000 points barrier with relative ease. In the meantime, however, there are increasing numbers of market 'gurus' and technical analysts forecasting a hefty correction, and partly as a result of this share prices levelled off in the second half of the month.
The dollar turned in a mixed performance, gaining strength in the first half of the month to around 1.73 guilders. Later, however, the U.S. currency retreated to under 1.70 guilders. The dollar did hold up better against the Japanese Yen than west European currencies.
AMSTERDAM STOCKS
Share price trends on the Amsterdam Exchanges NV were largely dictated by quarterly earnings figures and profit warnings. Although the outlook for the Dutch economy still continues to be rosy overall, it appears that some of the cyclical companies are experiencing some head wind. The bourse's biggest listed stock, Royal Dutch Petroleum, reported higher profits which mainly reflected higher oil prices. At the same time its cyclically sensitive chemicals division reported lower profits. As a result Royal Dutch's share price, which earlier in the month peaked at a new high, was forced to give up some ground.
Philips' share price fluctuated remarkably. The price came under severe pressure as a result of a corporate profit warning ahead of the quarterly results. While earnings were indeed sharply down year on year, investors were swayed by a pep talk from the company's new president Cor Boonstra, pushing Philips shares up sharply. Polygram, Philips' recorded music subsidiary, saw its share price plunge after revealing it was battling in difficult market conditions.
Chemicals concern DSM and al stocks, each reported a fall in profits over the third quarter. Dutch post and telecommunications firm KPN was able to hold its share price steady despite a string of influential factors such as the bourse launch of Deutsche Telekom, the approaching entry of new competitors on the Dutch market, its plans to take over courier company TNT for a sum of 2.7 billion guilders and uncertainty on the position of its cable subsidiary Casema following the break-up of merger talks with Philips' part-owned UPC. BolsWessanen was able to gain some ground in the wake of unconfirmed reports that British drinks concern Grand Metropolitan and Dutch trading company Hagemeyer were interested in buying the troubled food and drinks group.
NATIONAL MARKET
Supermarket store chain De Boer Winkelbedrijven hogged much of the limelight on the national issues market. The company announced it planned a merger with unlisted wholesaler Unigro to create the Netherlands' second-largest supermarket chain. De Boer's share price soared on the news.
Another focus of interest was media group Endemol Entertainment. Over the last few weeks investors were invited to subscribe to the issue. However demand from private investors in particular was so great that subscriptions were closed after only a few days. The subscription price was set at the top of the indicated price band (48 guilders) while the stock started trading on November 1 at 55.80 guilders.
Other interesting snippets included the planned merger between Heidemij and sector rival DHV, the sale by Getronics of its stake in Batenburg Beheer and the breakdown of the previously announced cooperation agreements between shipyards Van der Giessen-de Noord and Wilton Fijenoord and between sanitary ware maker Sphinx Gustavsberg and Keramik Laufen .
Retail and services group Vendex announced it planned to divest its stake in department store chain KBB, but before it was able to sell the stake KBB reported profit trends had been highly disappointing, as a result of which KBB shares fell sharply. After some hesitation Vendex decided to press ahead with selling its shareholding. Severely disappointing figures resulted in a plunge in Toolex Alpha's share price, while Multihouse's share price was also pressured after it was revealed that the software company is involved in a serious disagreement with a number of its clients.
INTEREST RATES
It was all quiet on the interest rate front this month, both within the Netherlands and abroad. Comments by various central bank officials yielded no clear picture on the likely future course of official interest rates. Economic indicators do not as yet signal an acceleration in the pace of inflation, so that for many tighter monetary policy is not on the cards. Dutch money market interest rates remained at a historically low level, while bond market rates also stayed relatively stable. The average yield on state bonds settled at around 5.5 percent.
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