After Fitch downgraded France's credit rating, attention should be paid to the movements of the French stock market

Fitch Ratings has downgraded France's credit rating from AA- to A+, citing the frequent government collapses that have sparked turmoil and challenged its ability to manage the rising debt burden. As a result, the French stock market may experience active fluctuations on Monday. Christophe Boucher, Chief Investment Officer at ABN AMRO Investment Solutions, stated that the impact of this downgrade is likely already reflected in stock market pricing. He noted, "At first glance, this is not a major event, but we will still closely monitor bank stocks, utility stocks, and, more broadly, all stocks related to public spending." Boucher believes that given the expected lack of improvement in France's public finances in the short term, the current discounted state of the French stock market may persist. Since François Bayrou proposed a confidence vote on August 25, the stock prices of Crédit Agricole, BNP Paribas, and AXA have lagged behind the French CAC40 index. The European Banking Authority's November report on the 2024 EU Transparency Report's first half data states that EU banks hold €506 billion in exposure to French sovereign bonds. Among them, domestic French banks have the largest exposure, amounting to €457 billion. The exposure of La Banque Postale accounts for 13% of its total assets, while the exposure of the Banque Populaire Group is 12%. Following Bayrou's proposal for a confidence vote last month, the performance of the "basket of stocks with over 30% domestic revenue" compiled by Barclays has lagged behind the French CAC40 benchmark index. So far this year, the French blue-chip index has risen 6%, underperforming the 9.3% increase of the pan-European Stoxx 600 index