The CAC ETF (Lyxor) replicates the CAC 40 index, which is composed of the 40 largest French securities representative of the main sectors of the french economy, while the securities are selected and weighted according to the size of their floating market capitalization.
The costs of the ETF CAC are quite low at 0.25% and the AUM is 4185M€. Replication is direct (physical) and there is a dividend distribution policy.
Alternative ETFs: C4D (Amundi in Euro), E40 (BNP Paribas Easy in Euro)
Latest developments
In 2017, the CAC40 achieved a performance of 9.3% which was more than offset by a -11% in 2018.
As for the other European or North American indices, the decrease is mainly due to the fall of the markets started from October against the backdrop of a trade war between the US and China, a rate hike policy considered too aggressive by the FED, and more specifically for France, the fear of stopping reforms because of the social protest which is amplified at the risk of destabilizing the government.
Since January 2019, the index is rebounding (+ 4.1%), due to the hopes of trade agreements and a more accommodating FED, but also Q4 corporate results less bad than feared and adjustments of earnings outlook for 2019 for the moment quite limited.
Index & components
It should be noted that the 10 main holdings (which represent about 55% of the index) belong to very different sectors, unlike the DAX (overweight in industrial stocks) or the FTSE100 (pharmacy and financials), the CAC40 is indeed more composite in its sectoral composition. However, three high-weighted stocks, Total (11%), Sanofi (7.7%) and LVMH (6.7%), can influence the index according to their own fundamental factors, which represents a bias. From a sectoral point of view, we can see that the consumer goods sector represented by luxury goods and cosmetics such as LVMH or Loreal, is one of the most important for the index (16.6%), just behind industry (18.4%), financials (11.1%) and energy (11.8%).
The CAC40's stocks are often world leaders with a very international exposure, and little dependence on the domestic market and with a strong sensitivity to the US Dollar. French macroeconomic statistics remains positive but especially investors regained confidence with the election of Mr Macron, a liberal and pro-European. The positive impact on French growth linked to the hopes for structural reforms as well as the lowering of corporate and capital taxes confirmed in 2018 are still far from being fully integrated. France is at the beginning of a new cycle and strong, positive trends could start this time if reforms continue.
The medium-term potential of the index is high, but is so far prevented by tough international context (trade war, FED) and EU politics (Brexit, Italy) and for a few weeks by internal issues (Yellow Vest). Financials should be key, as they could benefit from the gradual rise in long-term rates as growth resumes and higher inflation expectations, as is already the case in the US, coupled with a more favorable political context.
