November 1996 will likely go down in history as one of the best -ever months for the stock markets. World share prices rose over a broad front, setting a string of new records. There was frequent reason to crack open the champagne. Turnover levels were also high. The AEX index rose from 577.02 points at end October to 631.05- a rise of 9.4 percent.
General market sentiment was dominated by optimism about economic trends and corporate profits. It looks as though steady economic growth is set to continue hand- in-hand with low inflation and that is music to investors' ears. The markets were also cheered by the widely predicted re-election of U.S. president Bill Clinton which meant a continuation of existing economic policies.
Turnover levels
Share turnover amounted to 59 billion guilders, from 62.7 billion in October. Total turnover amounted to 146,652,8 billion. Cumulative turnover (January to November) was 1,804,784.9 billion guilders.
International
Wall Street set the pace on the international markets. The New York Stock Exchange was gripped by genuine euphoria, with the Dow Jones Industrial index hitting new records almost daily throughout the month. Over the whole month ,the index coasted almost 500 points higher to more than 6,500 points -a riseof more than eight percent. Negative news was all but ignored by investors while profit-taking also had little or no impact on share prices.
The upbeat investor sentiment was due on the one hand to favourable corporate earnings trends and on the other to falling capital market interest rates. The steady firming of the dollar was also seen as positive, both within and outside the United States. The dollar started the month at less than 1.70 guilders, but ended November at around 1.73 guilders before climbing further in the first few days of December. Britain's pound sterling also continued its upward climb of recent weeks.
Sentiment on most other foreign exchanges was similarly upbeat.
AEX issues
Financials performed particularly well among AEX component stocks ING, Aegon and Fortis all published favourable third-quarter earnings figures and upgraded their full-year profit forecasts. The sub-index for this segment jumped by no less than 14 percent, an unprecedented increase in a single month.
Among the internationals, bourse heavyweight Royal Dutch Petroleum reported lower quarterly profits at end October (after adjustment for profits on reserves) but the stock exchange flagship was nevertheless able to keep relatively well in step with the other stocks. Unilever reported a surprisingly strong surge in quarterly earnings, resulting in a further rise in its share price.
Of the other AEX component stocks Koninklijke PTT Nederland regularly hit the headlines. Towards the end of November it became clear that those opposed to KPN's TNT bid had backed down, making the takeover of the Australian company into a formality.
KPN further announced it was radically reducing its stake in cable company Casema to enable it to develop activities in the area of telecommunications.
Much media attention was also devoted to the court case brought against KPN by AEX-listed paper and office products group KNP BT, which started this month. KNP BT is seeking a ban on the KPN abbreviation on the grounds it leads investors to confuse the two companies.
BolsWessanen was repeatedly the focus of takeover speculation, which helped bolster the share price of the ailing foods and beverages group.
MidCap Index component stocks and local issues
The MidCap index, which has considerably outperformed its big brother AEX for some time, slowed the pace a little in November. The index rose 'just' 3.5 percent to 930.97 points. A significant factor contributing to the slowdown was the performance of Randstad, one of the main engines behind the index rise in recent months. The temporary employment services group fell back slightly due in part to reports of a growth slowdown in the Dutch temp sector.
On the local issues market there were some hefty share price swings, particularly as a result of earnings reports. Atag reported lower profits, and saw its shares tumbling as investors registered their displeasure. Shipyard Van der Giessen de Noord shares were also hit after the company reported that a shortage of orders would plunge it into the red. Another stock to fall sharply on disappointing quarterly results figures was Sphinx Gustavsberg .
Two stocks saw theirs directors/major shareholders shed all or part of their stakes. Executive chairwoman Sylvia Toth of Content sold a large part of her majority holding in the company through a public share placement. At broker/ market specialist Van der Moolen director Kroon shed his minority stake by privately placing the shares with a trio of financial institutions.
In both cases the announcement of the deals pushed up the companies' respective share prices. In Van der Moolen's case, however, the share price rise was also due in part to the market boom, as was reflected in the share price rises posted by other listed securities houses such as AOT, Kempen and Van der Hoop.
New Issues
Shares in entertainment group Endemol were admitted to listing on the first trading day of November. It had already become clear beforehand that the shares were attracting a great deal of interest and as a result the share price jumped higher. The first deal was done at around 55 guilders, compared with an introduction price of 48 guilders. A little later the share price crept even higher - to more than 60 guilders - but Endemol retreated a touch towards the end of the month.
In December shares in ASM International - which have been trading in the United States for some time now - will also be admitted to listing in Amsterdam. Prior to this however the company reported a strong fall in its results.
Interest rates
Trends in short and long term interest rates were diametrically opposed. Money market rates, currently at a post-war low, edged up fractionally due mainly to technical factors. However capital market interest rates fell even further, partly due to developments in the U.S. and partly due to the positive economic outlook for the Netherlands. The effective yield on government bonds dipped by more than 0.2 percent points to 5.2 percent in November.
For further information on the Amsterdam Exchanges NV please contact Herman de Ranitz on +31 20 523 4014 or Paddy Manning on 0171 436 4101 or alternatively enter text search Amsterdam Exchanges NV and Business Monitor.
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.
Business briefing Publishing Ltd, 1997 Tel: +44 171 820 7733
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