The week ending the day before yesterday witnessed Wednesday, investors withdrew the largest amount of money from investment funds in… European securities during the past 4 months, before French general elections scheduled for the day after tomorrow, Sunday.
The total funds withdrawn from European financial markets during the week ending Wednesday reached $2.1 billion, which is its highest level in 14 weeks, according to Bank of America estimates.
Political risks
While the main European stock index was flat during the week ending Wednesday, the outflow of money from the markets underscores the fragility of investor confidence, which is concerned about political risks in Europe, Bloomberg News reported.
French President Emmanuel Macron surprised the markets on June 9 by calling for early parliamentary elections after the gains made by far-right parties in the recent European Parliament elections.
Since this call, the French stock market has lost about $200 billion in value.
Among investors’ biggest concerns is that the far-right National Rally party, which is leading in the polls, will adopt looser fiscal policies if it wins a majority in the election.
French stock market loses around $200 billion in value since Macron announces early elections
Citigroup Bank analysts say that the French market may lose 20% of its value in the worst scenarios, according to the election results.
The main CAC 40 index of the Paris Stock Exchange declined by 8.8% during the second quarter of this year, heading towards recording the worst quarterly performance compared to the main Euro Stoxx 50 index of European stocks since the establishment of the single European currency area in 1999.
It is noteworthy that the French voters will vote next Sunday before the final round of elections next July.
Air France shares hit record low
Meanwhile, shares in Franco-Dutch airline Air France-KLM fell to their lowest level since its IPO a quarter of a century ago, as analysts at British bank Barclays said they expected turmoil in the French stock market that would hurt the airline’s earnings.
Bloomberg News Agency reported that Air France-KLM shares fell 7% during today’s trading on the Paris Stock Exchange, before reducing their losses.
The British Bank’s analysts said in their report that “political polarization in France threatens to disrupt the confidence of companies and consumers and increases the possibility of social unrest, which could threaten to disrupt the revenues of the French branch of Air France.”
They added that the company’s relations with trade unions could be disrupted by the early elections called by Macron.
The decline in Air France shares today brought the total decline since the beginning of this month to 22%, which is its largest monthly decline since the company launched a fundraising round from investors two years ago to help pay the aid. Government assistance received during the COVID-19 pandemic.
The French government owns 28% of the airline’s shares and holds two seats on its board, making the election outcome more important to it than to other companies.
