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Capital Markets

Portugal: A tale of big and small

When global events blew across the stock market, it sent Portugal’s smaller companies scurrying back into their shells just as they were being tempted out. That leaves only the biggest prepared to face the storm.

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THE SENIOR PORTUGUESE banker rails at fate. "It’s just so unfair," he groans, echoing what many in the market must be feeling. "Just when our economy has finally got its house is order and is in a great position to really take advantage of growth in Spain and Europe the opportunities in these economies are starting to look less bright."

Indeed, the small size of Portugal’s domestic market and its dependence on international trade, particularly with Spain and the rest of the EU, leaves its economy particularly exposed to global rather than domestic economic factors. Although this is sometimes a blessing, it is proving to be more of a handicap this time around.

After a stellar performance in 2007, in which the main index of Portuguese stocks, the PSI 20, posted a total return of 19.8%, substantially outperforming the EuroStoxx index, which offered only 8%, the PSI 20 has already given up most of last year’s gains, falling 13% since the start of the year.

"The performance of the stock market indices are more closely correlated with foreign and particularly Eurozone macroeconomic trends than the specific environment in Portugal," says Pedro Pintassilgo, head of Portuguese equities at F&C Investments in Lisbon.

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