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: Rate your response - (Asia-Pacific markets fluctuated with European and US futures down) – Asia-Pacific markets fluctuated amid low volumes due to holidays in mainland China/Hong Kong/Taiwan, with the Fed talking about further rate rises. Futures for Europe and the US point down.

Response to the crisis: Christmas only comes around once a year, and this ain’t it - (The employers’ association calls on the government coming out of the next elections to lower corporate, personal and payroll taxes (Expansion p26) – An exercise in drafting wish-lists is usual before Christmas and elections. This does not mean the wishes will be granted. Tax cuts are unlikely just after the elections (whoever wins will have 4 years left to get voters to forget). Even if the PP wins, I am pretty sure that they will suddenly “realise” that the budget situation is worse than they “thought” and ignore the employers’ wishes.

Real Estate: Trying to put the genie back in the bottle - (The PP would cancel the Housing Law and real estate investment booms after the 28th of May local/regional elections (Expansion p28) – Given that the practical application of the limits to rentals/sales prices included in the Housing Law depend on regional/local governments, the centre/right victory in the May 28th elections is a clear plus. However, this only provides a ceasefire until the next elections. Cancelling the Housing Law would be even better, but it only provides safety as long as the PP is in power (if that, as the PP may change its mind). Once the genie is out of the bottle, it is complicated to put it back in.

Mapfre/Linea Directa: Better together - (Mapfre expects generalised car insurance policy rises in the whole sector (Cinco Dias p11) – A rise in car insurance premiums is clearly preferable to the alternative, even if it is likely to be mostly a reflection of higher costs (inflation and regulatory personal injury payments). However, the fact that two of the major players in the sector are calling for premium increases in order to restore margins should make them easier to carry out.

Macro: Inflating differences - (The industry sector revenues index fell 5.1% YoY in April (adjusted for working days and seasonality) vs. +10.1% in March, while the services sector revenues index rose 2.2% vs. the +10.4% of March (National Statistics Institute) – The decline in industry sector revenues in April is hardly positive as it represents the worst showing in two years. However, as with inflation it showcases the difference in performance across sectors (consumer/capital goods up, energy/intermediate goods down). The same is true of services, with wholesale commerce dragging down the average, while other services (including hostelry, IT and scientific/administrative activities) maintain high rates of growth.

*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.?