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: Back to China doubts - (Asia-Pacific markets declined with futures for Europe down and those for the US mildly up) – Asia-Pacific markets declined on the return of fears regarding the Chinese real estate market. Futures for Europe are down and those for the US mildly up.

Response to the crisis: It is never the right time (I) - (Deputy PM Diaz calls for prudence when eliminating fiscal aid due to its strong impact (Cinco Dias Sat p28) – I already warned about the difficulty of eliminating fiscal aid to consumers in the face of rising prices. Not only is the elimination unpopular with voters but it should also fuel further rises in prices. Plus, the measures were termed temporary. And there is nothing more permanent than temporary measures.

Hotels: It was fun while it lasted - (Hotel night stays rise 1.2% YoY in August with average ADR +6.67% and RevPAR +6.84% (National Statistics Institute) – The growth in hotel night stays compares with +2.5% in July, continuing the declining growth trend seen since January, with modest growth during the summer high season, and a 1.2% decline in the length of average stays. With occupancy at August 2022 levels, the rise in ADR is relatively modest, bearing in mind the rise in inflation over the period. It was fun while it lasted.

Construction: It is never the right time (II) - (Contractors decide to go abroad due to the veto to the introduction of tolls on government owned motorways (Expansion Sat p5) – There is nothing strange about the contractors going abroad to seek opportunities once an expected sources of domestic business does not materialise. However, in a business based on confidence regarding government commitments, the Government going back on its promise to the EC to introduce tolls on government-owned motorways does not help. In addition to the negative impact on sector expectations, the decision places an added burden on the budget and encourages traffic growth, underminizing decarbonisation policies.

Macro: Not the ideal breakdown - (2Q23 GDP grew +0.5% QoQ vs. +0.6% in 1Q23, with domestic demand rising 1.0% vs. +0.2% (National Statistics Institute) – The QoQ growth rate is 0.1pp higher than that advanced on July 28th. The bad news is that 2Q23 GDP growth was based on an acceleration of domestic demand (+1.0% vs. +0.2%) in turn based on public consumption (+5.7% vs. -2.8%) and private consumption (+0.9% vs. +0.3%), while gross capital formation remained stable (at +0.7%, although with investment in machinery falling 1.8% vs, +7.1%) and the external sector made a negative contribution. Not the ideal breakdown.

*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.