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