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 4453M€. Replication is direct (physical) and there is a dividend distribution policy.
Alternative ETFs: C4D (Amundi in Euro), E40 (BNP in Euro)
Latest developments
In 2017, the CAC40 achieved a performance of 9.3% and after a favorable start in January is stable in 2018 after the correction initiated on Wall Street because of fears of commercial war and the fall of technology stocks in the wake from Facebook.
After this chaotic start to the year, the index should again evolve according to fundamentals, namely a cycle of higher corporate profits (+ 8% estimated in 2018) coupled with reasonable valuations (PER of 15x). The risks to global growth, namely the return of inflation, an economic war or the end of the US growth cycle, are not going to materialize in the short term which should allow the rise to continue.
However, the possible withdrawal of the US from the Iranian nuclear deal could lead to a further rise in oil, which would have negative effects on purchasing power and inflation in Europe and the US.
Index & components
It should be noted that the 10 main holdings (which represent about 52% 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 (10.1%), LVMH (6.7%) and Sanofi (6,6%), 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 the most important for the index (20.3%), followed by industry (18.3%), financials (13.8%) and energy (10.1%).
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 have improved significantly since several months, but especially investors regained confidence with the election of Mr Macron, a liberal and pro-European. The risk premium linked to the disastrous catastrophe scenario in the euro zone began to decline as soon as the first poll results were released, but the positive impact on French growth linked to the election momentum and hopes for structural reforms as well as the lowering of corporate and capital taxes confirmed for the 2018 budget are still far from being fully integrated.
France is at the beginning of a new cycle and strong, positive trends could start this time. The medium-term potential of the index is high, as the corporate earnings momentum now seems to have really kicked in after several false starts since 2012 - earnings growth is estimated at around 15% in 2017 and 8% in 2018. 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.
