Portugal poised to join Euronext

Portugal's stock exchange has signed a memorandum of agreement to join Euronext, Europe's second-largest bourse.

The pan-European exchange's latest recruit, the Lisbon and Oporto Stock Exchange, expects its forthcoming membership to attract more foreign investors to Portugal.

"We are certain that joining Euronext will make the Portuguese market more attractive. Naturally, that will set the conditions for a greater degree of liquidity," president Manuel Alves Monteiro said.

The Portuguese exchange expects to join Euronext in a few months, Mr Alves said.

It will then change name to Euronext Lisbon.

Consolidation

Mr Alves said an additional reason why the Portuguese exchange wanted to join was that it is becoming difficult for small European exchanges to survive as independent player amidst a wave of consolidation in the sector.

Euronext was formally established in September last year by the Paris, Amsterdam and Brussels stock exchanges.

In October, Lisbon initiated talks to join as well.

Falling value

Plagued by illiquidity, the Lisbon exchange has seen many foreign investors fleeing, with potential newcomers staying away in recent months.

The benchmark index of the 20 leading shares has slipped almost 17% so far this year.

Several billion euros have been wiped off the total value of the shares listed on the exchange in the process.

Floating stock market

Euronext has plans to sell about 1bn euros worth of shares this summer in an initial public offering.

The capital raised is to be used to raise the exchange's visibility within Europe and to pursue a policy of acquisitions.

The plan is part of a growing trend amongst exchanges to first demutualise and then offer shares to the public.

Euronext is aiming to become the dominant exchange in Europe.

The share offering will be a combination of new equity and stock being sold by the financial institutions that now own the exchange.

The main listing will be in Paris, but shares will also be traded domestically in Amsterdam and Brussels.