The Paris Bourse Is Magnifique

Two million Frenchmen believe that they cannot be wrong

Few Western nations have shown such distrust of the stock market as France. For decades, the average Frenchman has preferred stashing away gold coins to investing in the country's industry. For the past two years, however, the French Bourse has been on a rampage, thanks to a campaign by President Valery Giscard d'Estaing to "make the French owners of France."

The Paris Bourse is now the hottest stock exchange in Europe. Its stock index has risen 80% since the beginning of 1978, a period during which the New York Stock Exchange's Dow Jones industrial average mostly wandered between 700 and 900. Moreover, the number of people owning stock on the Bourse has doubled to 2 million. French companies raised some $2 billion through stock offerings in 1978 and 1979, four times the amount of the preceding two years.

While Americans have picked up the European habit of dabbling in gold, the French have been buying such hot securities as Engins Matra, whose products range from sports cars to armaments, up a sizzling 605% since 1977; pop radio station Europe No. 1, up 72%; chemical giant Rhone-Poulenc, up 149%; and food producer BSN-Gervais Danone, up 166%.

The Bourse's robust activity follows years of anemic performance. From 1961 to 1973, a time when France's economic growth rate was among the world's fastest, the Paris stock exchange remained as flat as a French crepe. During the autocratic presidency of Charles de Gaulle from 1958 to 1969, companies were, in effect, forced to borrow from the government-dominated banks rather than raise capital on the stock market. Referring to the Bourse's principal trading circle by nickname, De Gaulle declared icily: "France's policy is not made in the Basket." Stockbroker Antoine Durant des Aulnois recalls that being a dealer during the Gaullist era was "like selling corset ribs at a time when women didn't wear corsets any more."

The new French interest in stocks began with Giscard d'Estaing's solid victory in 1978 over the Socialist-Communist opposition and grew with his efforts to deregulate industry. It has been stimulated further by the Monory Law, named after Finance Minister Rene Monory. The statute, which was passed in July 1978, lets people deduct up to $1,200 a year from their taxable income for stock investments, provided that shares are held for at least four years. In contrast, the U.S. Congress in March passed a bill that will increase the maximum individual tax exemption for stock earnings from $100 to only $200, effective next Jan. 1.

Few Frenchmen had much experience in the market, but buying stock quickly became a new national obsession. French television now carries stock market reports on the 1 p.m. news. Mutual funds were quickly formed to attract small investors. The value of one of the most popular, ADF 5000, has increased 46.8% in the past two years.

The final proof that the Bourse is at last alive is a stock scandal. Experts have noticed that trading in shares of Rhone-Poulenc increased sharply just a week before the company's petrochemical subsidiary was sold to Elf-Acquitaine, the state-owned oil company. Since the deal was approved by the French government, there is a suspicion that some top government officials used their inside information to buy the stock. Two weeks ago, Le Canard Enchaine, a satirical and investigative weekly newspaper, charged that Anne-Aymone Giscard d'Estaing, the President's wife, had purchased Rhone-Poulenc stock. True or not, the allegations reflected the new French fascination with the Bourse Basket.

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