Tech sector tightens grip on European stock exchanges

LONDON/MILAN (Reuters) – Booming technology stocks are increasing their influence on European stock markets, with Prosus PRX.AS poised to grab a key position in the continent’s flagship index.

FILE PHOTO: Bob van Dijk, CEO of Naspers and Prosus Group poses at the Amsterdam stock exchange, as Prosus begins trading on the Euronext stock exchange in Amsterdam, the Netherlands, September 11, 2019. REUTERS/Piroschka van de Wouw

Prosus, one of the world’s largest technology investors, will debut on the Euro STOXX 50 .STOXX50E on Sept. 21 as part of an index reshuffle, index provider STOXX announced on Tuesday. Prosus owns nearly a third of China’s Tencent 0700.HK.

European Technology Index .SX8P is up over 14% so far in 2020 while the broader pan-European STOXX 600 .STOXX is down more than 10%, hit hard by the economic downturn triggered by lockdowns to combat the coronavirus pandemic across the continent. Tech stocks have dominated European and US stock markets throughout the COVID-19 crisis.

Inclusion in an index can help companies attract additional investors. Equita analyst Gianmarco Bonacina estimates that Prosus could benefit from up to 2 billion euros ($2.4 billion) in passive fund flows thanks to its promotion to the top 50 stock index.

As tech stocks have grown in influence, the once-dominant European banking sector has gradually shrunk over the past decade. French Societe Generale SOGN.PA and the Spanish BBVA BBVA.MC are downgraded relative to the benchmark.

The weight of the banking sector in the regional benchmark STOXX 600 index .STOXX is only 6%, according to Refinitiv, compared to more than a fifth in 2006. The technology sector has meanwhile exceeded 7%, its highest level since the dotcom bubble.

“A significant driver of European equities’ underperformance over the past decade has been its sector composition, with the region’s stock market moving away from technology and into more ‘legacy’ industries where underlying growth trends are more subdued,” Morgan Stanley wrote in a stock report. strategy note.

The telecom sector .SX7P, which experienced a golden age at the turn of the millennium, lost two places with the French and Spanish groups Orange ORAN.PA and Telefonica TEF.MC ready to be downgraded.

The other stock exiting the EURO STOXX 50 is German healthcare group Fresenius. FREG.DE.

Other companies joining the European elite include Dutch payment processor Adyen ADYEN.AS, German residential real estate company Vonovia VNAn.DE, French wine and spirits group Pernod Ricard PERP.PA and elevator manufacturer Kone KNEBV.HE.

($1 = 0.8434 euros)

Reporting by Julien Ponthus and Danilo Masoni in Milan; Editing by Elaine Hardcastle