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Neuer Markt`s global ambitions
German exchange might become `Euro Nasdaq`

By Gareth Vaughan, CBS MarketWatch
Last Update: 2:06 PM ET Jun 23, 1999 Also: NewsWatch

FRANKFURT (CBS.MW) -- Since its launch in March 1997, the Neuer Markt has taken Germany by storm. Some analysts say it`s changed the shape of the German equity culture. Others go as far as to say it could become the Nasdaq of Europe.

According to Josef Nagel, head of primary markets at Deutsche Boerse, good investment opportunities in the growth-stock Neuer Markt are abundant.

"Europe is somewhat behind (the United States) in the development of new technology -- in the Internet, biotechnology and life-sciences arenas, for example," Nagel told CBS.MarketWatch.com.

"But Europe is catching up, and that means, from an investor`s point of view, there are many opportunities for similar growth stories to that of Yahoo Inc. (YHOO: news, msgs)," he added.

IPOs flood the bourse

Launched in March 1997, the Neuer Markt now has 118 companies listed, of which 13 are foreign. Thirty companies have launched IPOs on the exchange in June alone.

The Neuer Markt roughly doubled its aggregate market capitalization during 1998 and now has a total market cap of about $36.9 billion (or 70 billion German marks).

"It`s the first investment vehicle supplying (German) retail investors with the opportunity to earn more than the 3 percent profit available through savings accounts," said Bernard Tubeileh, a Frankfurt-based Neuer Markt media analyst at Merrill Lynch.

Leigh Ann Kittell, a software analyst at BHF Bank in Frankfurt, said the Neuer has helped improve visibility. Before it came along, she said, German companies didn`t report quarterly data.

Neuer a toddler

Despite its growth and the flood of initial stock offerings, the German bourse is still a dwarf compared with its U.S. cousin, the Nasdaq Composite. The Nasdaq has some 5,400 companies.

But the Neuer Markt name is spreading. New York-based FortuneCity.com Inc. chose to list solely on it. FortuneCity`s president and chief executive, Peter Macnee, explained his company`s choice in Frankfurt recently. "There`s better value to be found in Europe because the Internet sensation has not been realized here yet," he said, speaking before a European forum on emerging technology companies.

Apparently, others agree.

"Merrill is talking to a few U.S. companies that want to be listed (solely) on the Neuer Markt," Tubeileh revealed.

Future doesn`t just smell of roses

But analysts point out that the Neuer Markt`s future is not all milk and honey. So far this year, its value is down about 25 percent, although that decline has started to turn around recently. As of July 1, the German bourse will have a benchmark index composed of its top 50 stocks, calculated on turnover and market cap. Some analysts worry this may push other stocks to the sidelines.

Another pitfall is the speed of development. "There`s hardly any secondary research done because there are so many companies coming to the market (that) analysts don`t have the time," Tubeileh said.

Euro Nasdaq

Some observers say that the Neuer Markt -- at least compared with the Continent`s other growth markets -- is now in position to become Europe`s answer to the Nasdaq. Grahame Cook, head of equity capital markets at WestLB Panmure in London, said the exchange has the building blocks in place.

"It`s got critical mass, a (big) number of companies, liquidity, depth of institutional support, and valuation advantages," Cook said.

He said these factors make the German bourse more attractive than other European growth markets, such as the Brussels-based Easdaq, France`s Nouveau Marche and London`s Alternative Investment Market (AIM).

"The (pan-European) Easdaq has no inherent domestic group of investors. The Nouveau Marche (with a market cap $5.1 billion) only has tiny companies. And AIM isn`t for growth companies -- it`s for small companies," he said.

AIM has 312 listings and a total market cap of $6.49 billion (6.3 billion euros). Both the Nouveau Marche, with 92 listed companies, and the Easdaq, with 44, have average daily trading volumes valued at $17.5 million (17 million euros). AIM`s is $17.8 million (or 11.3 million British pounds). All are well short of the Neuer Markt`s average daily trading volume, which is valued at $149.4 million (145 million euros).

Neuer goes Hollywood

Neuer Markt growth stories abound. EM.TV & Merchandising AG, the market`s biggest company, now has a market cap of $5 billion. It floated its stock in November 1997, with each share priced at the equivalent of 7 euros. EM.TV`s shares are now worth 1,260 euros a pop.

"Some investors have increased their money by 200 percent," said Merrill`s Tubeileh. He has three "buy" recommendations on stocks in the Neuer Markt`s media sector: EM.TV, Kinowelt Mediem AG and Singulus Technologies AG.

"I have a 1999 share-price target of 1,450 for EM.TV, 310 for Kinowelt (which is currently at 250 euros) and 160 for Singulus (up from the current 117)," Tubeileh said.

Deutsche Boerse`s Nagel said the media sector, along with telecommunications, has been the most dynamic sector of the bourse. "Germany is the No. 2 (country) when it comes to funding Hollywood movies, but only the Neuer Markt made that possible," he boasted.

Software suffers as Y2K sales drop

The Neuer Markt`s software sector -- which comprises 45 companies -- has helped drag the market lower this year. As spending on year 2000 products declines, software makers` share prices have tumbled.

Analysts and investors have feared that the companies that sell other types of business software -- such as PeopleSoft (PSFT: news, msgs), Oracle (ORCL: news, msgs), Netherlands-based Baan (BAANF: news, msgs) and Germany`s SAP (SAP: news, msgs) -- would experience sales slowdowns as their customers wait out the feared storm.

"Companies that we knew were specifically growing from Y2K have already suffered," said BHF Bank`s Kittell. Ixos Software AG has fallen 45 percent from its February high. Easy Software AG has shed 40 percent since its IPO on April 19. Shares in LHS Group Inc. have tumbled 60 percent from earlier highs.

According to International Data Corp., Y2K spending peaked in 1998 at $87 billion and will fall to $33 billion in 2000. Kittell said that, although these stocks are cheap now, she`d wait before buying them.

"September or October would be the time to start looking. Europe typically has a very long summer break, and third-quarter results are sometimes adversely affected," she said. Kittell added that her worst-case scenarios doesn`t see a stock rebound until January, but this gives companies time to focus on research and development

[Internetprophet]

Jetzt ham was auch offiziell !!!

[Internetprophet]

Jetzt ham was auch offiziell !!!