“Betting against France” would be the easiest trade in the world, says MarketWatch

The French presidential election is rapidly becoming one of the most unpredictable contests of recent years — even bearing in mind the U.K.’s decision to leave the European Union, and the election of Donald Trump as president of the United States.

Between scandal tainting the candidate for the French presidential election Francois Fillon , the prospect of the extreme right win in the second round, the Socialist Party and it’s very left champion, and the climbing of Emmanuel Macron in the polls, the uncertainties accumulate for what is a sure bet.

At least that is the advice given by the US financial site MarketWatch . “The simplest stock market choice in the world: betting against France,” says this respected publication in financial circles that is part of the Dow Jones & Company empire.

France: symbol of political uncertainty

Speculators would be well advised to sell French government bonds, Marketwatch advises, as their stock market price may fall in the weeks to come. The other way to make a buck at the expense of France is short selling: that is, the stock marketer sells a stock he does not own, hoping that when he buys it back to return to the owner, the price will have decreased, enabling it to add value in passing. Pascal de Lima, chief economist of the consultancy firm Economic-Cell contacted by France 24, considers the analysis of the financial site rather realistic: “There is a risk of volatility on the French financial market with sales movements to come due to the political context, “he admits.

 

The relationship between the alleged fictitious jobs case that weakens the favorite of a presidential election and the opportunity to make money on the stock exchange on the back of a country is in a word: uncertainty. “It comes as much from the outcome of the election as from the vagueness of the economic programs of the candidates,” says Pascal de Lima. For MarketWatch, France has become the symbol of political chaos, “even more than the British referendum on Brexit or the American presidential election.” “Who is going to win in France? Each of the four main candidates is at this stage able to win and we know absolutely not what it will do next,” summarizes the site.

As a Southern European country

Investors do not like to sail on sight and the first stock market consequences of this uncertainty are beginning to be felt. One of the most widely monitored indicators is the spread of interest rates on 10-year government bonds between France and Germany. Paris must now accept to pay more and more expensive compared to its neighbor to borrow on the markets. This interest rate acts as a revealer of investor sentiment towards a country: the higher it is, the more risky the economic situation is.

CHANGES IN INTEREST RATES ON FRENCH AND GERMAN GOVERNMENT BONDS
© Bloomberg

The economic impact of the “PenelopeGate” or the choice of Benoît Hamon by the PS is all the stronger “that political uncertainty adds to a worrying economic climate in France”, notes Pascal de Lima. The mix between low growth, rising unemployment and political blur represents a cocktail that “should further accentuate speculation in the weeks and months to come.”

This reactivity to the political upheavals of the markets is also a specificity of this presidential campaign. “In 2007 and 2012, there was nothing like it,” recalls Pascal de Lima. The nervousness of investors with regard to the political situation of a country was until now rather reserved for the countries of southern Europe, such as Greece, Portugal or Italy. For the French economist, MarketWatch’s call for speculation thus reveals, above all, a change of perception: “Even if France remains a very rich country, well-regarded by rating agencies, markets tend to react almost as If it was an economically more fragile country in southern Europe. “

Source: When an American media invites investors to “bet against France” – France 24