Can the AEX index restore itself again towards 630 points?

Can the AEX index restore itself again towards 630 points?

30 June 2020Reading time: 4 minutes

For many years Royal Dutch Shell, Unilever and ASML are the largest companies within the AEX index. Based on the stock market value, the Dutch payment service Adyen is now also part of this group. The price movements of these companies largely determine the sentiment of the entire AEX index.

Oil conflict

During the stock market crash early March this year, Royal Dutch Shell was the biggest loser of the AEX with a price drop of 20%. The oil company suffered from the worldwide declined oil prices, due to a conflict between Russia and Saudi Arabia. In short, Russia did not want to lower its oil production despite the approaching corona crisis. As a reprimand, Saudi Arabia decided to increase its oil production by 20% for a month. As a result of this conflict, the price of a barrel Brent oil plummeted with 30% in one week.

On top of that the corona crisis arrived and on March 9 this resulted in the first stock market crash since the financial crisis in 2008. That same day, the AEX lost 7% and since the all-time high of 630 points, the index eventually declined 35% to the lowest point of 404 points on March 18, 2020.

Important companies

After the big crash the stock price of Royal Dutch Shell, still remains at a lower level. It is thanks to companies such as ASML and Unilever, that the AEX index has recovered again.

The chip machine manufacturer from Veldhoven does not seem to be bothered by the corona crisis for now. The stock price of ASML even increased significantly. With a current stock price of EUR 322.60 (22-06-2020), ASML reached a new record. With the publication of the first quarter results, ASML announced that it will maintain its outlook for the remainder of this year and also the dividend remains intact. The demand for new chip machines and especially the newest EUV technology is still high according to the company.

Food company Unilever benefited amongst other things, from the massive hoarding behaviour by consumers, as a reaction to the COVID-19 outbreak. Although the stock price of Unilever still isn’t at its level before the stock market crash, there is nevertheless a solid recovery to EUR 50.18 (22-06-2020). Unilever is a bit more reserved about its outlook for the rest of the year.

Payment service company Adyen can also include itself now to the top five largest companies of the AEX. Adyen benefited from the explosively increased amount of online and digital payments worldwide, because brick shops were closed or didn’t accept cash anymore. Since the beginning of April 2020,  the stock price of Adyen has therefor massively increased with 84% to its current level of EUR 1,292 (22-06-2020). It is clear that companies like this are supporting the recovery of the AEX index.

Outlook 2020

Since the stock market crash in March, the AEX index recovered with more than 40% to 566,59 points at this moment of writing (22-06-2020). Other European indices show a similar development. For example, the German DAX has recovered since the crash even with 46%, while the French CAC 40 stays a little behind with a recovery of 32%. 

The most important question is whether the AEX index will recover again to the old level of 600 points and more. Large Dutch banks aren’t very optimistic about the remainder of this year. They fear that when the second financial support program by the Dutch government will stop, more wage sacrifices and layoffs will follow. The banks outline the same scenario for other European countries.

Banks such as ING and ABN AMRO are therefor already counting on more payment troubles with both business and private customers. Up to now Dutch banks have spent together approximately EUR 15.2 billion to allowances for customers with payment difficulties. This concerns things like extra credits or deferral of mortgage payments. It remains to be seen how the Dutch and global economy will develop in the next months. Will the number of bankruptcies and unemployment remain limited and what effect will this have on the AEX index?

The future price of the stocks is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

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24/10/2020 23:13:08