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.

Macro environment: Usual worries - (Asia-Pacific markets declined with European futures mildly down and those for the US flat) – Asia-Pacific markets declined due to continued worries over monetary policy and US banks. Futures for Europe were mildly down and those for the US flat.

Response to the crisis: Thinking about what might have been - (The Social Security minister contradicts the Minister for Labour and rejects making dismissals more expensive (Expansion p28) – The Minister for Social Security believes that increasing the cost of dismissals would discourage fixed contract hiring. The pity is that he does not take that reasoning to its logical conclusion. If increasing the cost of dismissal discourages fixed contract hiring, this should also apply to the forced transformation of temporary workers into fixed-discontinuous workers. This means that even if the employment numbers are good (see below) they may be worse than they otherwise could have been.

Macro: Good figures even for Easter, with some challenges - (Employment holds firm in March with 206,000 more affiliations to Social Security and 48,755 less unemployed workers (Expansion p26) – Excluding the March 2021 rebound from the 2020 collapse, the decline in registered unemployment is the largest since 2016 (although both 2017 and 2018 were close). In seasonally adjusted terms (important due to the Easter effect), registered unemployment declined by 38,737 vs. the -6,345 of February and the -12,462 of January, still showing a positive change in trend. As regards the rise in the number of affiliations to Social Security, the increase in seasonally adjusted terms was 151,943 in March vs. +81,808 in February and +57,726 in January, thus showing a positive trend. On a non-seasonally adjusted basis the largest MoM increases were in hostelry (+71,808), construction (+14,957), public sector (+14,983), health (+13,624) and education (+12,728), which is not an ideal breakdown.

Utilities: Ideology trumps efficiency - (The Government closes the door to extending the useful life of nuclear power plants (El Economista p14) – The Government has no intention of extending the useful life of nuclear power plants in the National Integrated Energy and Climate Plan to be presented in June, sticking to the decisions taken in 2019. Needless to say that much has changed in the electricity sector since then, especially as regards security of supply. As in other European countries, rejection of nuclear energy as part of a successful energy transition has more to do with ideology than making the transition work.

Iberdrola: 3 benefits plus a bonus advantage - (Sells assets in Mexico (to the Mexican government) for €5.5bn (Expansion p3) – The deal would seem to be very positive, as Iberdrola reduces its exposure to Mexico (and the populist policies of its President), obtains liquidity to lower debt/fund investments and reduces its carbon footprint (8,436MW out of the total 8,539MW sold are CCGT plants). As a bonus, the above also sends a message to the governments of the countries where it is present (especially Spain) that Iberdrola is willing/able to adjust its portfolio to focus on those markets with more predictable/stable regulations.

*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.?