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 more the merrier - (Asia-Pacific markets were little changed with futures for the US stable and those for Europe pointing down) – Asia-Pacific markets were little changed as the news of a new virus strain in the UK, that has led to a tighter lockdown and travel restrictions to Europe, and little progress on Brexit, were partly offset by an agreement in the US on a new US$900m stimulus package. Futures for the US are steady while those for Europe point down.
Response to the Covid-19 crisis: Misery loves company - (Europe seeks to isolate itself from the new coronavirus strain in the UK in order to avoid collapse over Christmas) – The world has had enough trouble handing the classic version of Covid-19, without having to deal with a new and apparently more contagious strain. So far, the Spanish government has not reacted directly to the new strain, other than calling for a coordinated EU response. However, the tighter lockdown imposed on parts of the UK are likely to already lead to further damage to Spain’s tourism sector, ahead of a potential ban of flights from the UK (already applied by several UE countries). If the new strain were to spread to Spain, this would reinforce arguments for more restrictive measures ahead of the full roll out of the vaccines, with negative effects on the overall economy.
Prisa: Halftime substitution - (Amber Capital and Telefonica force the exit of Mr Javier Monzon as Chairman of Prisa at the shareholders meeting, with the head of Amber, Mr Joseph Oughourlian acting as interim Chairman) – Given that Amber Capital is a purely financial investor, as are most of the minorities, the fact that it is taking steps to ensure that its plans for Prisa are applied is likely to be seen as good news. Note that it was the application of the plans, not the plans themselves (which apparently involve the separation of the media and education units, in order to isolate the education side from the entanglements of politics) that justified the change of Chairman. However, given the difficulties of the past, it remains to be seen whether the change in Chairman can really unlock value.
TMT: Getting blood from a stone - (The UGT trade union warns the regulator that there is no more room to lower tariffs without leading to job losses, while September saw 1m customers switch operator in fixed and mobile, a historic high, increasing 16% vs. September 2019) – A trade union arguing the case for softer telecom price regulation is certainly likely to be a welcome development for telecom sector investors, even if balanced by being presented as a way to maintain/create “decent” jobs (i.e. high paying ones). Softer regulation going forward could be amplified by ongoing sector concentration, encouraged by high competition for customers.
Macro: Less in, less out - (The October trade deficit fell 74.7% to €650.7m on exports of €25.282bn -5.9% and imports of €25.932bn -11.9%) – The sharp reduction in the October trade deficit sounds good, except that it is mostly due to the significant decline in imports (especially as the fall is due more to volumes than prices). Even so, the negative view is partly cushioned by the fact that capital goods (-7.6%), automotive (-5.5%) and consumer manufactured products (-6.9%) decline less than the overall figure, with durable consumer goods at +1.4% actually registering an increase. Exports falling 5.9% is hardly positive, especially as regards the -9.0% performance of capital goods.
*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.