ECONOMIC SPOTLIGHT - DUTCH SHARE PROSPECTS MIXED
While world exchanges revel in a
continuing securities boom, the Dutch stockmarket remains
lacklustre despite a series of largely positive annual
corporate results and signs of a more stable dollar, analysts
said.
    Prices and turnover on the Amsterdam Stock Exchange have
sprung back from lows reached when the dollar dipped below the
two guilder mark in January. But market analysts say only lower
interest rates or a further rise in the dollar, now trading at
around 2.09 guilders, could keep the momentum going.
    "Between end-1982 and end-1986 Dutch stocks rose by around
150 pct, but the dollar's sharp fall last year put the brake on
the bull market," said Philip Menco, analyst with bank CLN Oyens
en van Eeghen.
    The dollar's current level compares with an average in 1986
of 2.45 guilders, and 3.35 in 1985, official figures show.
    But Arjen Los, analyst with Dutch merchant bank Pierson,
Heldring en Pierson, sees room for some optimism,
   "The market is exaggerating the whole dollar affair. We've
seen the bottom of its decline. But what is lacking is a
stimulus on the interest rate front," he said.
    Analysts said they expected little impact from provincial
elections on Wednesday as the government's position was secure.
    "The scope for price rises in Dutch shares is narrow, given
the limited room for lower interest rates," said Los, adding the
Dutch market can currently only dream of returns of around 15
pct seen in rising markets elsewhere in Europe.
    "When the dollar slumped in the second half of 1986, U.S.
And U.K investors were heavy sellers of Dutch stock. They made
an enormous currency gain," Menco said.
    Finance Ministry figures show foreign investment in Dutch
stock last year fell by nearly half to 4.2 billion guilders.
    Los envisaged no significant revival of foreign interest in
the Dutch market. He saw the large, liquid Dutch pension funds
pursuing a more aggressive portfolio management policy while
continuing to invest in markets with weaker currencies.
    Outflows of non-bank Dutch capital totalled a record 21.4
billion guilders last year, 12.3 billion of which stemmed from
securities transactions.
    "Dutch institutions have been rallying to buoyant foreign
markets, but this season's results could coax some of them back
to the relatively underpriced Dutch market," Koos Ten Have of
Staal Bankiers said.
    Ten Have said Dutch price/earnings ratios based on
forecasts of 1987 results were broadly unchanged compared with
1986. With an average ratio of 10, they were still attractively
lower than shares of other exchanges, he added.
    He said the reliability of the strong guilder was a further
factor favouring Dutch stock investments.
    Senior bank economists said this week's official economic
forecast by the CPB planning agency painted a gloomy picture of
the Dutch economy but this would not shake investor confidence
in the Dutch business sector. The Dutch economy was doing
relatively well compared with other nations, they added.
    Analysts say most companies have fulfilled expectations,
while some firms, particularly in food and publishing,
surprised the market with continued solid profit growth despite
major dollar and sterling investments.
    Unexpectedly positive results from companies like Unilever
Plc-NV <UN.AS>, NV Philips Gloeilampenfabrieken <PGLO.AS> and
Heineken NV <HEIN.AS> were balanced by poor performances by the
three banks, which achieved higher profits partly by reducing
their risk provisions. Analysts still have doubts about the
insurance sector, and many companies stressed the negative
impact of lower currencies on their guilder earnings in 1986.
    Food and publishing are seen as major growth areas, despite
the fact many of these companies have significant activities in
the U.K and U.S.
    Food chain Ahold NV <AHLN.AS> reported an 8.1 pct increase
in net 1986 profit but said it did not see profits growing in
1987 due to the uncertainty of the dollar.
    Turnover declined by 5.7 pct to 11.4 billion guilders.
About 1.5 billion guilders of this decline was due to the lower
dollar and one third of turnover volume was achieved in the
U.S.
    "Ahold is too cautious over the dollar," Los said. "As long as
such companies continue to maintain their U.S. Activities and
fund their expansion there, the negative influence is purely an
accounting effect."
    Koninklijke Wessanen NV <WESS.AS> and Heineken also managed
handsome profit increases of 16.6 and 7.5 pct respectively,
while blaming disappointing turnover in their substantial
overseas activities on the lower dollar.
    Initial publishing results indicate a bumper year for
shares in this sector and ensure firm interest despite higher
price/earnings ratios, ranging from 12 to 14. REUTER
