David Hudson forwards a piece on the end of Germany's attempt to create an equivalent of the NASDAQ:
Subject: Last one to leave...
Not only is recess over, they're shutting down the playground.
German stock exchange shuts Germany's high-tech Neuer Markt exchange after 96 percent slide | Thu Sep 26, 7:07 AM ET
By DAVID McHUGH, AP Business Writer
FRANKFURT, Germany - Germany's stock exchange operator said Thursday it will eliminate its tech-heavy Neuer Markt and impose tougher reporting standards for listed companies after Germany's equivalent of the Nasdaq lost almost all of its value in a two-and-a-half year slide.
The Neuer Markt as well as the small-cap SMAX segment will be shut by early 2003, with companies listed there transferred to two new groupings with different reporting rules, Deutsche Boerse said in a statement.
The exchange said the move is intended to reassure investors, who have seen a 96 percent drop in the Neuer Markt's value from its peak in March 2000, about the reliability of the companies listed.
"We want to organize our markets in future according to the needs of investors," Deutsche Boerse executive Volker Potthoff said. "We are ensuring the highest transparency with clear rules."
Deutsche Boerse said it will reorganize the market into a top tier of companies aiming to draw on international capital markets, and a second group for companies operating largely nationally.
The flagship Prime Standard segment will be open only to companies who follow international accounting rules and provide comprehensive information to investors, including quarterly earnings reports, the exchange said. The reporting rules will be less stringent for the lower National Standard.
The new standards will also have the force of law, under a recent reworking of German securities legislation, the company said.
Indexes will be composed solely of Prime Standard companies, with German blue chip stocks continuing to be grouped in the familiar DAX index. Fluctuations in the value of smaller companies will be reflected by two new indexes, one for firms in traditional industries, and another for high-tech companies.
Once the toast of software, e-commerce and Internet investors, the Neuer Markt's slump and a lack of new stock offerings had led to growing speculation that its days were numbered.
After its launch five years ago, it made billions for its investors, soaring to 8,140 in March 2000 before a plunge that outstripped the 77 percent on the Nasdaq. It played a key role in the expansion of Germany's tech sector.
But skepticism about its future increased when the Swiss stock exchange last month mothballed its tech segment - also called the Neuer Markt. The Swiss closed their index to new issues and said it wouldn't actively market the name any more, though the segment still exists and the stocks still trade.
Other tech markets across Europe have suffered steep declines as well: Italy's similarly named Nuovo Mercato and Paris' Nouveau Marche are each down 93 percent from their 2000 peaks.
Posted by DeLong at September 27, 2002 01:51 AM | Trackback
Strange how some topics like structural reform in Europe attract a lot of comments, yet this item, which seems deeply significant, and closely related to the same debate, apparently attracts no interest.
Posted by: Edward Hugh on September 28, 2002 04:52 AMI cannot explain myself how when bad news hit the US economy, European bourse indexes dip more than the DJ or the NASDAQ. For one thing, one might naively expect the various stock markets to be substitutes rather than complement, and be considered as means to hedge risk by diversifying across nations.
But in fact, we see a dynamic version of the home equity bias: when risk perception rises investors retract from their market, but apparently even more so from foreign markets. In response I would actually tilt your 401k more towards these (relatively) underpriced markets these days...
Posted by: Jean-Philippe Stijns on September 28, 2002 06:44 PM>>I cannot explain....<<
I can't claim to understand this either. Since I don't know as much about the stock market as George W Bush apparently does, then I couldn't say whether stocks are a 'good buy' and hence overpriced or underpriced right now (or ever, for eg Samuelson's macro inefficiency argument).
On the difference between US and European tech stocks, this could be related to perceptions that European technology companies are less productive (in general) than their US counterparts. The point is possibly that if the 'new economy' has suffered a set-back in the US, in some areas of Europe the industry incumbents could have just played and lost.
Two other general points to explain why the European markets are generally in inferior tow to the US ones: Steven Roach's point about the lack of an alterantive global engine, and the point that Brad sometimes reiterates: the US is the world's importer of last resort.
Is this not extremely unstable. Of course. See inter alia Ken Rogoff in Chapter 1 of the latest IMF Outlook
Posted by: Edward Hugh on September 29, 2002 01:25 AMOr is there a reason for which we would think that European bourses are more (over?-)sensitive to news than Wall Street? Is it that from a distance, the extra perceived uncertainty (due to relative disconnect with the American economy) makes European traders even more sensitive to news about the American economy than they're American counterparts? On the flip side, Wall Street is known to be quite insensitive to news about the European economy. One of my personal puzzles...
Posted by: Jean-Philippe Stijns on September 29, 2002 09:22 PM