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: Financial worries - (Asia-Pacific markets fell as do European futures with futures for the US mildly up) – Asia-Pacific markets fell amid a return to worries over the financial sector. Futures for Europe are down and those for the US slightly up.

Response to the crisis: Man’s best friend is not the dog, it’s the escape goat - (The Minister for the Economy will expand the “monitoring” of margins to the whole food chain (Expansion p30) – The Government already has enough information to “monitor” the whole food chain via that derived from taxes (corporate tax, VAT etc.). And if a more precise analysis were needed it could always get the National Commission on Markets and Competition (CNMC) to help, as rooting out anti-competitive/abusive behaviour is its job. This may lead to the conclusion that the “monitoring” will take the shape of a search for someone to blame for food inflation. Man’s best friend is not the dog, it’s the escape goat.

Banks: All about the money - (The Chairman of Banco Sabadell says that it will be the shareholder who will bear the cost of the tax on banks (Expansion p21) – The Chairman of Banco Sabadell is correct in saying that the new tax on banks will be borne by the shareholders as they are the ones that will be ultimately impacted by the lower profits. That is if the tax is not passed on to customers, which is forbidden by law. But it is unlikely that there would be an explicit “new tax” charge to customers but rather a change in commercial policies by the sector. Not that the Government would really care. It's all about the money, not who pays it.

Hotels: Occupy the hotels - (February saw 16.8m hotel night stays +23.6% YoY, with 51.6% occupancy vs. 44.4%, ADR rising 13.23% and RevPAR +32.97% (National Statistics Institute) – The rise in hotel night stays is significant although it is lower than the 46.4% rise seen in January. This said, the rise in occupancy continues to support healthy increases in ADR and RevPAR, with recent sector comments pointing to a continuation of the good tone in Easter and the summer high season.

Macro: Top lines are still strong - (The Industry Sector Revenue index (adjusted for working days and seasonality) rose 10.5% YoY in January vs. +15.6% in December, while the Services Sector Revenue index saw 12.2% growth vs. +14.2% (National Statistics Institute) – The slowdown in the rate of growth of industry and services in January is not positive.?Additionally, in industry, the growth was still supported by energy (+24.2%) and non-durable consumer goods (+18.8%), while durable consumer goods showed only 5.4% growth. In services, hostelry showed the strongest growth (+27%), which should not surprise. In any event, note should be taken that the above are revenue numbers and that costs are also experiencing significant increases also.

*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.?