CAC 40 Index: Investing in French multinationals

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You’ve heard of French corporate giants like Sanofi, Total, LVMH, L’Oreal, Renault, Airbus, Axa, BNP Paribas and many others. An interesting thing about French corporations is that they are more “multinational” than companies in many other countries. For instance, companies in France’s leading CAC 40 index generate nearly 70% of their revenue from outside France. More than half of their workforce is also outside France. All the companies I named above are components of the CAC 40 index. Let’s find out what this index is, how it works, and how you can invest.

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What is it?

The CAC 40 is the most popular stock market index in France. It represents the performance of 40 of the largest and most liquid stocks on the Euronext Paris stock exchange. It is one of the most popular European indices among foreign investors. More than 40% of its listed shares are held by foreigners.

The CAC (Cotation Assistée en Continu) 40 index was formed on December 31, 1987 with a base value of 1,000. For the uninitiated, Cotation Assistée en Continu (Continuous Assisted Quotation) was an early automation system used by the Paris Bourse (now Euronext Paris).

It's a market capitalization-weighted index. Until December 2003, the stocks were weighted based on the total market capitalization. Since December 2003, the index weighing switched to free float market capitalization, similar to other global indices.

The index reached an all-time high of 6922.33 at the peak of Dot-Com bubble in September 2000. It never touched that high again.

CAC 40 index constituents

An independent Index Steering Committee reviews the index quarterly on the third Friday of March, June, September and December. Any changes in the index composition are implemented two weeks later.

The Index Steering Committee ranks the top 100 companies based on their market capitalization and share turnover in the last 12 months. The committee then picks 40 stocks such that they are "a relevant benchmark for portfolio management" and suitable underlying assets for derivative products.

Currently, the ten largest constituents in the index are:

  • Sanofi SA
  • LVMH Moët Hennessy – Louis Vuitton SE
  • Total SE
  • L'Oreal
  • Air Liquide
  • Schneider Electric SE
  • Danone
  • Vinci SA
  • Kering
  • BNP Paribas

How to invest

The American Depository Receipts of many CAC 40 constituents are listed on the US stock exchanges, where you can buy them directly. If you want direct exposure to the CAC 40 index, you can invest in exchange-traded funds (ETFs) tracking the index or having a strong exposure to the CAC 40 constituents. Here are some:

  • iShares MSCI France ETF (NYSE: EWQ)
  • Lyxor CAC 40 ETF (EPA: CAC)
  • HSBC CAC 40 ETF (EPA: K40)
  • Amundi CAC 40 ETF (EPA: C40)