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 usual suspects - (Asia-Pacific markets declined with futures for Europe mildly down and those for the US flat) – Asia-Pacific markets declined due to rising concerns about China’s economy and Fed policy. Futures for Europe were moderately down and those for the US flat.
Response to the crisis: Measure of last recourse - (Dismissals rise 40% and exceed 476,200 in 1H23 (El Economista p23) – The rise in dismissals is mainly due to workers on fixed contracts. This is not a good result given that the Government has been trying to discourage dismissals even going as far as to forbid them in some circumstances. Additionally, it is important to note that employers generally try to avoid firing workers on indefinite contracts given the expense. So, this does not point to strong optimism on the part of employers.
Investor sentiment: More optimistic, but not on Europe - (According to the Bank of America investor survey fund managers extend their bet on tech companies with less pessimism than in the past and lowering cash in portfolios from 5.3% to 4.8% (Expansion p13) – In the latest investor survey fund managers have become more optimistic about the global economy and extended their bet on tech companies while reducing cash in portfolios. This points to rising risk appetite. Unfortunately, this does not extend to European equities, where investors see price declines in view of disappointing earnings.
Corporate margins: The nail that sticks out gets hammered - (Large corporates boost their margins to historic highs (Cinco Dias p22) – The rise in corporate margins is logical given the high inflation that has been passed on to clients, with some costs, including labour, not having kept pace. As the margins involved consider the ratio of EBITDA/sales, this does not include the negative effect of higher financial expenses. The above information is not neutral, as it has been provided by the new observatory of corporate margins, recently created by the Government. The main downside is that it looked at the time like the observatory was created to justify higher taxes on corporates should margins widen.
Real Estate: More to come - (Metrovacesa, Aedas and Neinor raise prices and have combined sales of €3.2bn in 1H23 (Expansion p3) – In 1H23 pre-sales for the listed housing developers fell 6%. This is not surprising given the rise in interest rates and uncertainties, including perhaps the expectation of lower prices in the future delaying buying decisions. However, lowering prices might be difficult for the developers in view of the rise in building costs. This said, the €3.2bn in pre-sales should allow for a decent pace of deliveries over the next years.
*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.?