French election may put pressure on government-owned companies

As a precursor to the upcoming French run-off election on May 6 I have listed all of the French companies which have the Government of France as a shareholder. On the eve of the run-off election and Wednesday's stalemate debate, it appears that the leftist poll leader Francois Hollande will become the next President of France and therefore we must ask ourselves, which companies are at risk should this happen? 

The election of a left-leaning politician is not a meaningless event in the eyes of the market. We have already seen the effect of the first round of the election where Hollande came out in front resulted in the CAC40 dropping 2.8 percent, while the S&P500 only dropped 0.9 percent, which was partly due to the election results and the fall of the Dutch government.

Although we are only focusing on French companies, the impact of Hollande winning the presidency could most likely have profound effects on the rest of Europe. The impact of the relationship between Germany and France would be deeply impacted by this appointment. Regardless of whether Hollande’s socialist rhetoric (which he has used to campaign) sums up his true intentions, it has already created tension with respect to Germany, with Merkel saying that she would personally run against Hollande if she could. A rupture in the appearance of a united front between France and Germany would come at a bad time for Europe as the only thing that has kept Europe from falling into a panic, is the united economic policy of its biggest nations.

From a French perspective, some of the companies in which the government holds a large amount of shares could possibly face selling pressure should Hollande win on May 6. Apart from the French banks which could possibly incur a 'Hollande effect' as mentioned by Tomas Berggren, many other companies also face the earnings risk of an 'anti-business' presidency. Here is the list of government owned companies, including the size of the government stakes.

The main reason why French stocks, including government-owned companies, could face selling pressure is simply because Hollande's election will create confusion in the markets. In the worst case, Hollande's election might bring back memories of the last socialist President, Francois Mitterand, who nationalised banks and insurance companies in 1982.

Whether or not the market overracts, an 'anti-business' French President would only be good for bears!