French brokers, like those in other single-currency zone countries, are gradually adapting to a pan-European market. While investors are holding on to domestic equities, they are also boosting portfolios with other European stocks.
"The French equity market has been outperforming Europe since 1997, so there has been no incentive for domestic investors to sell French stocks," says Philippe Legrand, head of pan European equity sales at SG Global Equities. "But they have been adjusting their portfolios with regular movement of new inflows into non-French equities."
There has also been a general shift into equities from other asset classes. Ten years ago, mutual funds in France had only 10% of their total assets in equities, with 60% to 70% of that invested domestically. By 1999, equities had grown to one-third of total mutual fund assets, of which more than 60% is non-French. So the proportion of total funds dedicated to non-French equities has risen from 3% to just less than 20%.
That shift should continue. European rules limiting pension fund investments to 10% in any single exposure present a challenge to funds that follow national stock market indices.