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: Always look on the bright side of life - (Asia-Pacific markets rose and futures for Europe and the US point up) – Asia-Pacific markets rose on increased risk appetite tied to hopes for a better treatment of technology firms in China/more stimulus as well as increased optimism regarding Fed rates. Futures for Europe and the US point up.

Response to the crisis: An easy test - (The rental market could lose 108,500 homes or 11.7% of the supply due to the effects of the new Housing Law (Expansion p30) – The Housing Law will be a good test of whether a new PP-led government will change key measures approved by the Socialist-led one. Although it is true that the application of many of the measures is left in practice to the regions/municipalities, it would be a strong message that change will take place. I do not have much hope that this will happen.

Labour: Where did all the workers go? - (The available labour rate falls to a historic low in Spain (El Economista p25) –The decline in the number of prime age workers is a clear problem, especially as it seems understated, as it is not clear that many of the officially unemployed (part of the theoretical active population) want to work. The above leads to a strange market with still a high volume of unemployed workers but still difficulty for employers to fill jobs (the rigidities of the housing/labour markets are likely related to this), which does not help to control inflation. And on the other it makes it even harder to maintain the Spanish pay as you go pension system.

Naturgy: Something for everybody - (Will resume its spin-off plans and will pay €580m more in dividends (Expansion p4) – Resuming plans for the separate listing of regulated and liberalized businesses makes sense in terms of the core shareholders having greater options in allocating their capital (or exiting the part they do not like altogether). Higher dividends could also please income-oriented investors. But in the end, some sort of decision regarding governance will have to be taken.

Macro: Potential for a rebound - (The June CPI showed YoY growth of 1.9% vs. the +3.2% of May, with underlying inflation of 5.9% vs. +6.1% (National Statistics Institute) – The decline in the headline CPI below the 2% ECB target was already much talked about in the advance published at the end of June. The main points to mention are that the decline is due to fresh food/energy, as the underlying inflation rate has not experienced a similar decline. That part of the low inflation is due to tax decisions (as the rate at constant taxes is at 2.5%). And that YoY comparisons are about to get much tougher, if the MoM figure (+0.6% in June) does not improve, as June 2022 featured a 1.9% rise, but July -0.3%, August +0.3% and September -0.7%. There is clear potential for a rebound.

*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.?