Take 5 and come back tomorrow (3/9/24) Markets Government activism TLGO Hotels IAG Manufacturing PMI

None of what follows is investment advice.

Market environment: Still trying to read central banks ?– (Asia-Pacific markets were flat with European and US futures little changed) – Asia-Pacific markets were little changed, with investors focused on economic data that might provide hints regarding monetary policy. European and US futures show only modest moves.

Response to the crisis: The power to meddle – (The Government boosts its interventions in corporate transactions for a total of €25bn since 2021 (Expansion p3) – Growing government activism in corporate affairs is a global trend. In Spain there is no shortage of examples, with the veto to the Magyar Vagon bid for Talgo being the most recent. This is not positive, as it increases uncertainty for investors (there is little clarity regarding the thinking behind the moves) and it is not as if the Government has shown itself to be adept at industrial policy in recent times (especially as regards energy). It is unfortunate that the Government seems to like meddling in corporate affairs, just to show that it can.

Talgo: Divide and conquer – (Trilantic plans to dissolve its alliance with Oriol and Abello in Talgo in order to ease the sale of its stake (El Economista p5) – The dissolution of the shareholders agreement could be quite negative as it grouped shares amounting to over 40% of Talgo (i.e. above the 30% bid threshold). This would allow the Trilantic private equity firm to sell out (it has under 30%) to a single buyer without triggering a bid for the minorities. This raises speculation that Trilantic might sell to Criteria (the Government’s go-to domestic shareholder) as part of the effort to keep Talgo “Spanish”. The main obstacle seems to be the Criteria desire to only invest if there were an industrial partner involved.

Hotels IAG: Slowing as we reach the peak – (Spain received 10.9m foreign tourists in July +7.3%, with total spending of €15.535bn +11.9% (National Statistics Institute) – The July figures show substantial growth, which is especially significant as it is the start of the peak season, however, as I have pointed out recently, the YoY monthly rate of growth is slowing, In spending: May +19.7%, June +16.6%, July +11.9%, in tourist numbers: May +11.5%, June +12.1%, July +7.3%. Additionally, in July the growth in packaged tours (+17.5%) was stronger than that of direct bookings (+10.8%), which is not an ideal indicator for margins.

Manufacturing PMI: Keeping the head above water – (The manufacturing PMI index for August came out at 50.5 from 51.0 in July (S&P Global) – Although still at the expansion stage (>50), manufacturing in August seemed to slow, with export-led new order growth being positive (although sentiment regarding further growth was negative) and production, hiring and cost pass through being less so. The stagnation scenario is not unique to Spain.