Portugal Financial Market Studies

To understand Portugal's financial markets, it helps to have a historical understanding of its major stock exchange, the Euronext Lisbon (EL). EL is part of the first worldwide stock exchange, NYSE Euronext, and trades a wide variety of equities, fixed-income securities, warrants, derivatives, unit trusts and ETFs. The official BVL General Index is similar to the NYSE Index in that it includes all listed shares. There is also the popular big-cap index, the PSI-20.

Known within Portugal as the Bolsa de Valores de Lisboa (BVLP, the Lisbon Stock Exchange), EL has roots in downtown Lisbon going back to 1769, when it was called the Assembleia dos Homens de Negocio. A competitor, the Porto Stock Exchange, was launched in 1891. A right-wing junta closed both exchanges in 1974 for a period of two years. In the 1990's, the two exchanges were merged into the BVLP. Then, in 2002, the pan-European stock exchange Euronext N.V. purchased BVLP and converted it into Euronext Lisbon. Finally, in 2007, Euronext and the NYSE merged, and EL became part of the NYSE Euronext.

Portugal is a favorite market for traders around the globe, including offshore hedge funds. It has a well-run and transparent financial system, supportive financial policies, and safeguards against short-term risks. Financial service providers, such as prime brokers, are attracted to Portugal because they can count on active markets, fair regulation by the Portuguese Securities Market Commission, stable banks, and access to all of the other European markets. For those learning how to start a hedge fund, attention should be paid to opportunities afforded by smaller markets with active derivatives trading, such as the market in Portugal.

In addition to the stock exchange, the country has a central bank (Banco de Portugal), which is a member of the European System of Central Banks. The bank was chartered in 1846 as a result of the merger of Banco de Lisboa and Companhia de Confian?a Nacional. The latter was an investment company charged with financing the Portugal's sovereign debt. Banco de Portugal was nationalized in 1974 and shortly thereafter became the supervisor of the country's compact banking system. The two largest banks are Banco Comercial Portugu?s and the Caixa Geral de Depositos. The latter is owned by the state. Relative to the banking systems in other EU countries, Portugal's is very competitive in terms of asset quality, profits, efficiency and liquidity. In short, Portugal offers a positive financial environment for investors, both domestic and worldwide.