Majestic Research

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NYSE Shares Seen to Fetch Premium on Debut

Published: March 07, 2006

NEW YORK: The New York Stock Exchange, the world’s biggest stock market, makes its trading debut this week as the most expensive of the world’s publicly traded bourses. The success of counterparts around the world helps explain why. 

NYSE Group Inc’s stock begins trading March 8 amid a global rally for shares of securities exchanges that’s in its fourth year. The stock is priced at 37 times NYSE’s projected earnings for next year. 

Shares of Deutsche Boerse AG, Europe’s largest exchange by market value, have risen 19% this year. Hong Kong Exchanges & Clearing Ltd, the biggest in Asia, is up 27%. The industry is benefiting from rising markets, increased share volume and the ability to charge higher prices, analysts say. The NYSE forecasts that its earnings next year will be four times higher than last year. 

“The stocks are certainly more expensive than they were a year ago,’’ said Doug Atkin, chief executive of New York-based Majestic Research and former head of Instinet, an electronic stock market. “People are piling into this space, but I think that if you look at the benchmarks around the world, these are great businesses.’’

The FTSE/Mondo Visione Exchanges index, which tracks shares of 16 exchanges around the world, more than tripled from the end of 2002 through 2005. The index has gained 23% this year, compared with a 4.3% gain for Morgan Stanley Capital International’s World Index. 

The Big Board’s valuation is almost twice that of Frankfurt- based Deutsche Boerse and higher than Hong Kong Exchanges, which fetches 28 times its 2007 earnings. – Bloomberg