Why are non-resident holdings of French shares falling?

The Bank of France’s latest study (1) shows that since 2014, non-resident holdings of French listed shares (whether all shares o r the CAC40) have fallen. This trend gathered pace from 2017 to 2019. Non-residents hold fewer shares in France than in other European countries, where these holdings have actually been rising. What accounts for the fall in non-resident shareholdings in France? We can think of: A pessimistic explanation: the French equity market has under perform ed relative to other countries; An optimistic explanation: the French have begun to buy more shares, and domestic holdings of French shares have replaced foreign holdings. An observation of the facts suggests the optimistic explanation (increase in domestic shareholdings) is the right one . Reference: Banque de France Bulletin no. 231/4 September/October 2020 . Non-resident holdings of French shares