amsterdamtrader

Avoiding mistakes is a highly rewarding trait for traders. Pressing the wrong buttons or trading with the wrong variables will invariably cost you dearly. A true source for self-hatred too. The same logic doesn’t count for the stock exchange themselves. Running an exchange shouldn’t be regarded as rocket science. Open your trading pit or computer system for trading and sell the price information to subscribers. Make money on both sides. Messing up is rather common for the employees of NYSE Euronext. Introducing the wrong new option series or blocking trading altogether by imposing the wrong price limits happens almost on a daily basis. An alcohol raid in the Euronext premises may reveal surprising results.

Yesterday NYSE Euronext messed up the price feed. All stocks in the Amsterdam midcap index traded in negative territory. Heavy weight Draka even dropped as low as 9%. With 25 stocks in the red zone, the market average of the index was a plus of 2% according to Euronext. It doesn’t take a mathematician to note the error. Turned out Euronext used the wrong closing prices of the previous day. According to Euronext’s spokesman they are still investigating the matter, and the unreliable information hasn’t led to the wrong trades. Investigating is fine, but wouldn’t put my money on the other part of the statement..

(Photo by Aviva – the Canadian girl that is, not the British company)

Yesterday I mentioned the fact Amsterdam’s AEX index is having such a wonderful start of 2009, outperforming the rest of the world. Nothing bad about making a positive result in three days, but it turns out the Dutch market index is a true underperformer over the past years. According to the an Australian newspaper the AEX ranked nummer 19 in the list of last years worst performers:

Reykjavik (OMX index) -94.4 per cent
Moscow (RTS) -72.5 per cent
Dubai (DFM) -72.4 per cent
Bucharest (BET) -70.5 per cent
Dublin (IOI) -66.2 per cent
Hanoi (HCMSI) -65.9 per cent
Shanghai (SE Composite) -65.4 per cent
Athens (Athex) -65.3 per cent
Vienna (ATX) -61.2 per cent
Lima (IGBVL) -59.9 per cent
Pakistan (KSE-100) -58.3 per cent
Riyadh (Tadawul) -56.5 per cent
Cairo (Case 30) -56.4 per cent
Brussels (Bel-20) -53.8 per cent
Helsinki (OMX Helsinki) -53.4 per cent
Budapest (BSEI) -53.3 per cent
Oslo (OBX) -52.8 per cent
Mumbai (Sensex 30) -52.5 per cent
Amsterdam (AEX) -52.3 per cent
Istanbul (ISE 100) -51.6 per cent

The collapse of Fortis and problems of other financials weighted heavily in the AEX. Bad luck. On a ten year basis however, the situation is even worse. Iceland’s crash saves the AEX from the last place in a ranking of 84 indices. From Paul Kedrosky’s Bloomberg terminal:

This overview doesn’t fully explain how it handles the currency effects and the dividends. The annual dividend yield in the AEX of, say, 3% makes quite a difference in the total result. The main cause of this terrible performance is the set of rules for selecting stocks in the AEX. The traded volume of stocks is the main criteria for the indexcomposition. Ten years ago the internethype boosted shares like UPC and KPNQwest to astronomic levels before they were added to the AEX. By following the latest fashion the oldest index in Europe had outperformed it’s peers in the ten preceding years. But as the fashionable John Maynard Keynes already correctly noted, “In the long run, we are all dead”.

Comparing stock market indices. It’s not like horse racing or comparing nations, and apart from the football pitch I wouldn’t call myself a nationalist. Happy to see though the Dutch stock market, the AEX, outperforming the rest of the civilized world. Even doing better than the US and emerging markets like France and Italy. Curious how long it will last. Considered selling my private investments and making an extra 5% on a boring savings account in the remaining 51 weeks of 2009. The Dow Jones of the low countries, AEX, is usually carrying the red lantern in the results. Will pay attention to the Dutch underperformance in the next post.

2009, the first three trading days

*AEX : 9,49%

*MIB : 6,59%

*CAC : 5,54%

*SMI: 4,75%

*DAX : 4,49%

*Eurostoxx : 4,43%