The Belgian star basket Bel20 has lagged considerably behind the stock exchanges in neighboring countries over the past ten years. However, there is no undervaluation.
The Brussels star index passed the 4,000 points mark for the first time on September 20, 2006. Anyone who put 1,000 euros into a Bel20 basket on that day has realized zero added value in almost 18 years. Fortunately, there was still an annual dividend. The index currently has a gross dividend yield of 3 percent, or net just over 2 percent.
From 2006 to 2014, the Brussels barometer still performed quite in sync with its French and Dutch neighbors (see graph). The outbreak of the credit crisis in 2007-2008 pushed all stock markets into decline, after which a recovery followed from 2009.
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Over the past ten years, the Dutch AEX index and French CAC40 index have decoupled from the Bel20. Since 2022, the Euro Stoxx50 index – the most important stock market indicator of the euro zone – has also performed superior. That has everything to do with the sector composition. Sectors that are not or barely present in the Bel20, such as technology, luxury and construction, have at least doubled in the past ten years. Sectors that weigh heavily or weigh in the star index, such as banks, real estate and telecom, have contributed negatively to the evolution of the index since 2014 (see Table).
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The Dutch AEX star index, on the other hand, has a high technology content with the chip trio ASML, ASMI and Besi. That helped the AEX almost double to a record level since September 20, 2006. The CAC40 index enjoyed the high luxury content with shares such as LVMH and Hermès.
The essence
- The Bel20 exceeded 4,000 points on Wednesday for the first time in two years.
- To break the 2007 record, an additional increase of 19 percent is needed.
- At 16 times average earnings, Belgian star shares are trading around the European average.
Since the beginning of this year, technology has continued to advance thanks to AI enthusiasm, bringing the annual profit for the AEX to 14 percent. Luxury, on the other hand, is having a hard time – partly due to the slowdown in China – as a result of which the annual profit for the CAC40 is limited to 8 percent.
Despite the inferior performance of the Bel20 over the past ten years, its valuation is close to that of the other European stock exchanges. The average Bel20 share is trading at 16 times earnings, according to a calculation by the Bloomberg news service. The Dutch AEX index has the highest valuation of all neighboring stock exchanges with a price-earnings ratio of 18. The large valuation differences are elsewhere. Japanese and American companies trade at well above 20 times their earnings (see table).
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If the valuation gap between Europe and the US can narrow somewhat and if interest rates can cool further in the coming months, the interest-sensitive Bel20 can move to higher regions. But to break the record of May 23, 2007 (4,756.82 points), an additional increase of 19 percent is needed. That no longer seems feasible for this year.
