Investing.com - After showing significant losses last week due to the dissolution of the National Assembly, French stocks rebounded on Monday, with the CAC 40 closing up 0.91%, and the trend remains positive Tuesday morning.
However, French stocks are still far from erasing last week's losses, a situation that could present buying opportunities according to Barclays analysts, who expressed their views in a note published Tuesday.
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The analysts noted that recent polls suggest the two most likely outcomes for the legislative elections are either a cohabitation government with the RN or a Parliament without a majority, but the outcome remains uncertain, which should lead to erratic price movements in the stock market.
Barclays also estimated that the main risks worrying investors are:
- Political instability making France ungovernable
- Fiscal indiscipline, with a more spendthrift government or simply a government unable to pass reforms
- Business-unfriendly policies with higher taxation and more government intervention
- Questioning the integration of the EU and its institutions
However, Barclays analysts also pointed out that the decline in some stocks has probably been exaggerated.
This includes BNP Paribas (OTC:BNPQY) (rated “overweight” with a target of €80), Edenred (EPA:EDEN) (rated “overweight” with a target of €61), Veolia Environnement SA ADR (OTC:VEOEY) (EPA:VIE) (rated “overweight” with a target of €38), Vinci SA (EPA:SGEF) (rated “overweight” with a target of €140), and Sanofi (NASDAQ:SNY) (rated “overweight” with a target of €105).
Conversely, they noted that telecom operators Orange SA ADR (NYSE:ORAN) and Bouygues (EPA:BOUY) have significant exposure to the French domestic market, making them more vulnerable to the current political uncertainty.