"Brexit Economic Turmoil...Mid-sized Companies Hit Hard"
[Asia Economy Reporter Yujin Cho] "London loses the crown of Europe's largest stock market to Paris"
Amid the fallout from Brexit (the United Kingdom's withdrawal from the EU) and economic sluggishness, the UK has ceded the title of 'Europe's largest stock market by total market capitalization' to France.
On the 14th (local time), Bloomberg reported that according to its own calculations, the market capitalization of the French stock market reached $2.823 trillion (approximately 3,755 trillion KRW), surpassing the UK's $2.821 trillion. This is the first time France has overtaken the UK since data measurement began in 2003.
Bloomberg described this as "another symbol of the UK's contraction following Brexit," adding that "other European competitors are replacing the UK’s top position."
According to Bloomberg, in 2016, when the UK decided on Brexit, the UK stock market's market capitalization was $1.5 trillion greater than France's.
Michael Saunders, a former monetary policy committee member of the Bank of England (BOE), pointed out, "If potential output had not declined due to Brexit, there would have been no need to raise taxes and cut spending," and added, "The entire UK economy has been permanently damaged by Brexit."
The British BBC reported that economic turmoil dealt a direct blow to mid-sized companies' stock prices. This year, the FTSE 100 index, which focuses on large-cap stocks in the UK stock market, fell only 0.4%, but the FTSE 250 index, which tracks mid- and small-cap stocks, plunged 17%.
The companies with the largest stock price declines over the past year include Mitchells & Butlers (-37%), online gambling operator 888 Holdings (-70%), and Marks & Spencer (-40%).
BBC analyzed that the aftershocks from former Prime Minister Liz Truss's tax cut plan put pressure on the pound, which directly impacted corporate earnings.
Since market capitalization was measured and compared based on the US dollar, the pound showed greater weakness against the euro. This year, the pound fell 13% against the dollar, while the euro declined by 9.2%.
On the other hand, the French stock market, led by companies dominating the global luxury market such as Louis Vuitton, Dior under LVMH (Louis Vuitton Mo?t Hennessy), and Herm?s, is holding up well due to strong earnings.
In the French stock market, LVMH's stock price surged 22% over the past six months, and Herm?s rose 37%. Bloomberg explained that this sharp rise in stock prices was driven by expectations that luxury consumption would surge as COVID-19 restrictions eased in China.
According to Bloomberg statistics, Chinese consumers accounted for about 35% of global luxury demand (pre-pandemic basis).
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