A head start in Spanish equities

First of all, let’s be clear. The following is not investment research/advice.?And, as such, it involves no investment recommendations. These are my thoughts on Spanish equity issues, which I find relevant. I share them freely (and not just as regards price). As always, I am only trying to help. Please read the rest of the “discomplainer (*)” at the end of the article.

Market environment: - Everything in moderation including moderation - (Asia-Pacific markets rose with European futures up and those for the US mildly down) – Asia-Pacific markets rose moderately, following the US, ahead of publication of the US CPI number. Futures for Europe are up and those for the US mildly down.

Response to the Covid-19 crisis: The requirements for receiving the cash do not apply to spending the cash - (The Government agrees with the unions an increase in the minimum wage to €1,000/month against the opposition of the employers, backdating the increase to the start of the year) – The Government agreeing with the unions an increase in the minimum wage despite the opposition of the employers should not surprise, as consensus on this issue does not seem to have been one of the conditions imposed by the EU for access to Recovery Fund cash. It, however, highlights the lack of a true consensus regarding Spain’s economic model, which is a pre-requisite for effective and efficient investment of the monies.

Utilities: A principle isn’t a principle until it costs you something - (The Minister for Ecological Transition says that if energy prices remain high this could endanger the ecological transition as it would increase costs and distance citizens from it, with the fact that everyone has decided that the whole world has to be digital, renewable and green leading to inflation) – The Minister for Ecological Transition highlighting that high energy prices could get in the way of a transition to a decarbonised economy has negative implications. One is that the transition is being “imposed from above” (i.e. with insufficient public opinion backing where it counts, that is, when there is a cost attached). Another is that trying to square the transition with public support might require someone else to bear the cost (i.e. the utilities).

Telefonica: Connection established - (The Brazilian competition authority gives Telefonica the go-ahead to buy part of the Oi Movel assets for €914m, in a deal where the assets will be distributed among Telefonica, America Movil and TIM) – Telefonica finally being allowed to buy part of the assets of Oi in Brazil is good news, as it should complement its coverage and (don’t say this too loudly) lower the degree of competition in the market. This should shift some of the attention from the micro to the macro level in Brazil, which might not be ideal, and not just because of global monetary policy developments (see next comment).

Mexico/LatAm: Where have you been for the last 200 years - (Mexican President Lopez Obrador attacks Spain and calls for a “pause” in the bilateral relation) – This is not the first time that the Mexican President “attacks” Spain, having most notably demanded the King of Spain apologise for the “conquest” of Mexico in the 16th century, and now extending the complaint to the actions of Spanish corporates in the last years. Blaming Spain for the current problems of LatAm countries is starting to be quite popular, which might be negative for a number of large cap stocks with significant presence in the region (BBVA, Repsol, OHLA and Iberdrola being among those with exposure to Mexico). And this despite the current governments in Spain and Mexico being more ideologically aligned than in past years.

*The above information has been read/understood/summarised/evaluated/copied as well as I could to provide a guide to Spanish equities, given available timing/intellectual constraints, and I accept no liability for misreading and/or mistranslating the original copy as set out in my previous article (which I urge you to check, as I am only trying to point you in the right direction, I hope). As for what you may decide to do, after reading the above, please contact your legally approved provider of investment advice on Spanish equities.?