Take 5 and come 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: Getting Fed up - (Asia-Pacific markets rose with European and US futures increased mildly) – Asia-Pacific markets generally rose despite aggressive Fed comments. European and US futures rose mildly.

Response to the crisis: In through the out door - (The senate approves the employment law that complicates collective dismissals (Expansion p25)) – I have already commented on the negative effects of making Spain’s labour market more rigid. Complicating the capacity for mass lay-offs (always a painful decision) is one of them. Unfortunately (but logically), politicians are more focused on current employees (and voters), than on potential jobs that could be created if there was less of an exit price for investing in Spain, should the project not work out.

Banks: Higher rates might be bad for banks (But then again, what do I know?) - (The ECB demands higher capitalization levels due to fear of the impact of higher rates (Expansion p19)) – As I’ve recently commented the sharp rise in target prices for banks is predicated on the idea that rising rates would contribute to NII, without an offsetting rise in NPLs. The European banking regulator calling for higher rates to offset the risk posed by higher rates does not seem to square with this. But then again, what do I know?

Macro: Taxing more of nothing is not a good idea - (Private bankers see a slowdown in the arrival of wealthy individuals to Spain (Expansion p15)) – The introduction of a new tax on wealthy individuals is not a good idea, as Spain (basically Madrid) was well on the way to replacing Miami as the destination for wealthy Latin American individuals fleeing negative home environments. This means less investment (mainly in real estate) and consumption. Taxing more of nothing is not a good approach, at least in my opinion. But Portugal is probably happy.

Construction: Connecting is good - (ACS, Acciona, Sacyr and OHLA achieve record levels of contracting in 2022 (Expansion p3)) – Record levels of contracting is very positive for contractors. The key question is to what an extent the contracts will be profitable at the end of the day. If the contracts have been obtained with the right incentives by subsidiaries with good local connections the outcome is likely to be better.

*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.?