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: Waiting for the CPI - (Asia-Pacific markets rose with European futures down and those for the US moderately up) – Asia-Pacific markets rose on China tech strength ahead of publication of the US CPI. Futures for Europe are down and those for the US moderately up.

Reaction to the crisis: Two for the price of one - (PM Sanchez will create new taxes on banks and utilities in order to collect €7bn) – Introducing additional taxes, even if in theory transitory, is not a good idea. Especially if done by surprise (in the case of the banks) and for transparently populist motives. This does not help to increase confidence in Spanish stocks. Additionally, in the case of the utilities, the “Iberian exception” involving a limit to the price of natural gas for electricity generation was meant to have done away with the “windfall profits”, so either the limit does not work, or “normal” profits are being taxed twice. In the case of the banks, it is also more of the same as ECB plans to limit the “windfall profits” of the banks as a result of rising rates have already been discussed. In any event, as we are talking of sectors with high barriers to entry, the most likely outcome is that the cost will be passed through to clients in one way or another. So, it will not be very helpful in terms of controlling inflation or pressure on household budgets.

Ferrovial: Less is more - (Heathrow limits daily capacity and asks the airline to not sell any more tickets) – Limiting capacity is a good idea, especially if you do not have the resources to deal with more. At least you can claim that you are doing it to improve the customer experience (or at least not make it worse). But this is not likely to help in terms of limiting ticket price increases.

Cellnex: Winter is coming - (Exits the bidding for the Deutsche Telekom towers and sees a sharp rise in its share price) – The reaction of the Cellnex share price to the company exiting the bidding for the Deutsche Telekom towers confirms my opinion that the current market is allergic to higher debt or capital increases (as in the case of Grifols). It is not just the issue of rising rates but also the increasing aversion to financial risk.

Macro: Heads you lose, tails you lose - (The Euro reaches parity with the dollar) – The significant decline in the Euro in recent months should not surprise given the difference in monetary policy between the Fed and the ECB. Nevertheless, this is not positive for the Eurozone as it will likely increase inflationary pressure via a higher Euro price of imports (especially energy). But a much more aggressive monetary policy on the part of the ECB would not be much help, given the likely negative effect on growth and risk of Eurozone fragmentation.

*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.?