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: Tech solutions - (Asia-Pacific markets rose with futures for Europe and the US pointing up) – Asia-Pacific markets rose despite continued pressure on China, with tech hopes helping as pressure from treasuries took a breather.?Futures for Europe and the US point up.

Response to the crisis: Jobs for the boys - (Spain’s wage bill for civil servants exceeds by 8.5 points the OECD average (El Economista p23) – I have already commented that the Government’s response to any crisis is to increase expenditure. And the worst part is that the expenditure that is increased is often structural. And there is nothing more structural than wage payments to public sector employees. This may be partly due to the belief that the solution to most problems is a bigger public sector, but it also provides plenty of opportunity for patronage.

Banks: No competition - (The rural savings banks obtain market shares of more than 30% in several provinces (Expansion p9) – The growth in market share by the rural savings banks seems related to the fact that, unlike the commercial banks, they have not cut either employment or branches.?In this respect it could be argued that their progress is not at the expense of the commercial banks, as they service areas which the commercial banks do not see as profitable to service. In fact, they may be helping the commercial banks by lessening pressure for the latter to retain a presence in those areas.

Hotels: Hot and expensive - (British and German tourism demand suffers due to the heat wave and inflation (Cinco Dias p3) – The decline in growth of German and British tourists, the largest source overall, was offset by that of other European countries, so the impact is not that significant. The high visibility being given to high temperatures in the context of the “climate emergency” certainly does not help, but the accumulating impact of inflation was predictable (and predicted). The main consolation is that this is likely to mostly impact lower income tourists, which should be less harmful for margins.

Construction: Growth risk - (Acciona, Elecnor and Vinci compete for Peru’s high-tension grid (Expansion p5) – The decarbonization process is likely to require significant investment in electricity grids in order to be able to handle the greater production from renewable sources and demand from EVs among others. The main attraction of electricity infrastructure investments is the stability and predictability of the business. Unfortunately, the stability is also dependent on the political environment, which does not seem to be at its highest in Latin America (including Peru) at this time. Then again, Spanish construction companies have a long track record in Latin America, and presumably they have weighed the risks.

*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.?