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: Times are tight - (Asia-Pacific markets declined with futures for Europe up and those for the US flat) – Asia-Pacific markets declined led by Japan, with investors still struggling with potential tighter monetary policies and focusing on US economic data that might justify it.

Response to the Covid-19 crisis: That can is certainly getting a kicking - (Spain will lead the rise in corporate insolvencies this year (+24% with a further +26% in 2022) in the context of a less strong recovery in activity than expected, according to the General Council of Economists) – Spain’s economy is experiencing a subpar recovery (in view of the sharp fall in 2020) which should not surprise given the weight of tourism and car manufacturing, which justifies the high increases in insolvencies. The problem is in determining how high the underlying problem is due to all of the protection measures taken by the Government, including yesterday’s 6-month extension of the suspension of the obligation to declare bankruptcy. It would probably be better to allow the bankruptcies and provide help to stakeholders than to continue to kick the can forward.

Utilities: What a surprise! - (The Government will extend the tax cuts on electricity from January in order to prevent a 42% rise in prices) – When the cuts in taxes to try to offset the rise in electricity prices first took place it seemed already evident that it would be difficult to reverse them.?The trend in electricity prices should be up at least for a number of years in order to encourage decarbonisation. And no government wants to be blamed for overtly raising electricity prices (as opposed to covertly doing so).

Takeover rules: My house, my rules - (The Government extends to 2023 the anti-takeover shield for EU investors) – The capacity to block takeovers of strategic Spanish companies even by EU investors was introduced in theory to protect the former from the sharp price declines that followed the start of the pandemic. The environment as regards markets and the pandemic has certainly changed but the Government’s desire to remain in control has not. But it is not exactly investor friendly or pro-EU integration.

CIE/Gestamp: When the chips are down - (Car producers in Spain build 2.6% less units than in 2020 (and 26% less than in 2019) through October due to the lack of chips) – The supply chain issues, especially as regards semiconductors, has been evident for some time, and is behind many of the production issues including in the car manufacturing industry. The problem for the Spanish listed car parts manufacturers is that it is a global issue, so their geographical diversification may not help much.

*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.?