Spain’s blue-chip IBEX 35 stock index has bounced back from early-2019 lows but is still trailing in comparison to its performance 12 months ago.
Containing some of the best-known names in the Spanish business world, the IBEX 35 is trading at 9,060.20 (as of the time of writing), well above the 12-month low of 8,363.90 that it touched on 27 December.
But a year ago, on 14 May 2018, it stood at 10,257.80, a level that has not been seen since.
Liquidity is the key
This is despite a poll victory last month for the ruling socialist party and its leader Pedro Sanchez, which was seen as a stabilising factor on a turbulent European scene. The party is pro-European Union and in favour of economic reform.
However, they fell short of an outright parliamentary majority and would need to govern in coalition.
Constituents include: banks such as Santander, CaixaBank and Sabadell, communications group Telefonica, electricity and gas giant Iberdrola, infrastructure group Ferrovial and International Airlines Group the company which owns British Airways and Iberia airline.
Every quarter, the membership list is reviewed.
In its most recent Article IV health check of the Spanish economy, concluded in November, the International Monetary Fund (IMF) stated that: “The Spanish economy continues to make up ground lost during the crisis, but the recovery is maturing...Real GDP [gross domestic product] growth is projected to moderate to 2.5% in 2018 and 2.2% in 2019 before gradually slowing to its potential rate, estimated at around 1.75% over the medium term.”
But the IMF warned: “Public debt remains close to 100% of GDP. The headline fiscal deficit has continued to come down in 2017 and is projected to fall below the 3% of GDP Maastricht criterion in 2018. But much of this reduction can be attributed to the strong economic cycle and low interest rates, while there was no adjustment in the underlying fiscal position in 2018.”
“A decisive historical role”
It added that “several downside risks are clouding the medium-term outlook” and “encouraged the authorities to persevere with policies and reforms aimed at further enhancing economic resilience, reducing public debt, improving productivity, reducing inequality and increasing employment, especially raising long-term and youth employment”.
It added: “The stock exchange has been fulfilling an essential function in the development of the economy, as it channels savings towards productive investments and helps the flow of wealth.”