Barron's Plays on the French Election

by: SA Eli Hoffmann

Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:

French Face-Off Could Roil Stocks by Vito J. Racanelli

Summary: French voters head to the polls April 22. Betting websites currently put 63% odds on capitalist Nicolas Sarkozy. Socialist contender Ségolène Royal follows by just 1-2 percentage points in the polls. Some stocks that may be plays on the outcome:

  • Sarkozy wants to reform France's 35-hour work-week, which should improve productivity at labor-intensive companies like food retailer Sodexho Alliance (SDX).
  • Royal wants to up spending on housing and infrastructure, which could benefit cement maker Lafarge S.A. (LR).
  • She supports a higher tax rate on dividends, which would hurt stocks with high payout ratios like France Telecom S.A. (FTE), but might be a boon for companies with low ratios like ST Microelectronics N.V. (NYSE:STM) and Rhodia SA (RHA).
  • Sarkozy Royal 08 04 2007A Royal victory could mean new oil taxes, which would hurt Total S.A. (NYSE:TOT).
Barron's: From a macro standpoint, when Socialist Francois Mitterrand was elected in 1981, share prices fell 30% in the following month. A Sarkozy victory should benefit housing, defense and financial stocks, while a Royal win will help construction companies but hurt banks.

Related Links: French presidential election, 2007 on WikipediaAngus Reid's French Election Tracker