Take 5 and come back tomorrow

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: The pause that refreshes - (Asia-Pacific markets rose with European and US futures pointing up) – Asia-Pacific markets rose on relief that the Fed interest rate hiking pause could signal more positive long-term conditions. Futures for Europe and the US point up.

Response to the crisis: Inertial taxation - (The Government wants to activate 14 tax increases on January 1st (Expansion p24) – The current (and likely prospective) Government has no aversion to tax increases. But the above list is not based on the formation of a new Government and budget but mostly to the application of already approved measures. However, I have doubts that many of them will not be eventually reversed, especially as regards VAT, given the negative impact they could have on inflation.

Banks: Making room - (Banks will sell this year almost €12bn in toxic assets (Expansion p17) – Depending on the price/recovery potential/provisioning, selling non-performing assets is a good idea, as it liberates capital and makes room for potential future NPLs. The main problem is that this could be taken as an indication that substantial entries of new NPLs are expected.

Telefonica: A new sub on the bench - (Zegona intends to resume the merger of Vodafone Espa?a with MasMovil (Expansion p3) – A leveraged buy out followed by an in-sector merger should be a good combination for reducing competition, should it be allowed by the competition authorities. The main risk as in other mergers is that the competition authorities demand that synergies be used at least in part to favour consumers (i.e. lower prices/better services) which the rest of competitors would have to match. In any event, a potential Vodafone Espa?a-MasMovil merger is currently only a potential one, as there is a proposed Orange-MasMovil tie-up on the table. But at least there is now a sub on the bench, should the Orange-MasMovil deal fail to be approved.

Corporate governance: The more the merrier - (The Minister for Labour retakes her plan to have the trade unions sit on the board of companies (Cinco Dias p25) – Having the trade unions sit on the board of corporates is meant to be a way to protect the interests of the company workers. But if we are talking about “stakeholder” representation there should also be a presence by the customers, suppliers and, if we are at it, the Government. That would make for big boards, The more the merrier.

*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.