The Ibex 35 is the domestic and international benchmark for the Spanish stock market and measures the share prices of the country’s 35 largest companies by market capitalisation.
Created with a base level of 3,000 in 1989 and inaugurated on 14 January 1992, the index is governed and supervised by the Sociedad de Bolsas. It calculates, publishes and disseminates this index in real time.
Part of Grupo Bolsas y Mercados Españoles (BME), it also manages the technical trading platform of the Spanish stock exchange market. Trading on options and futures contracts on the Ibex 35 is provided by Mercado Español de Futuros Financieros, another subsidiary of BME.
Unlike many other European benchmark indices, the weightings of companies in the Ibex 35 are not capped. According to research by the BME, Ibex 35 companies generated just 34% of their revenues from Spain in 2016 and a combined 46% of revenues were sourced outside the Eurozone.
What does it monitor?
The Ibex 35 has two functions: to reflect the behaviour of the Spanish stock market and to serve as the underlying asset in the trading, clearing and settlement of options and futures contracts linked to it.
It represents 90% of the cash traded on the Spanish stock exchange, making the sample sufficiently representative of the market and allowing it to effectively gauge the performance of the stock market for the past 25 years.
The return on the index between its first trading session when it closed at 2,676.12 basis points and today’s level of around 9,500 is 255%, leaving an average yearly return for the period of 6.82%.
It marked its lowest level in its first year, specifically on 5 October 1992, at 1,873.58 and it reached its highest level on 8 November 2007, when it closed at 15,945.70 basis points.
What stock markets does it cover?
The Ibex 35 measures the free float shares of the most liquid traded stocks, but it not subject to any specific sector diversification. Although many large companies that are regularly traded on the stock exchange with large daily trading volumes are part of the index, they are included because of their liquidity rather than size.
Financial and real estate service companies make up 35.87% of the index with oil and energy the second largest sector at 18.53%. Other sectors include basic materials, industry and construction (8.08%), consumer goods (13.40%), consumer services (9.34%) and technology and telecommunications (14.79%).
Who decides on the 35 companies?
Monitoring the index, as well as the review of its composition, is the responsibility of the Technical Advisory Committee. Every six months, the committee decides which companies will enter or leave the index, depending on various factors, such as liquidity, prices, capitalisation or number of shares.
In the half-yearly selection of the 35 most liquid securities, there are no minimum or maximum number of changes that can be made. There may be no changes at all or as many changes as deemed appropriate. It all depends on the liquidity measurements.
For a stock to be a candidate for inclusion on the Ibex 35 it must pass certain minimum tests. The first one establishes that the average capitalisation of the security on the index must be more than 0.30% of the average total index capitalisation during the control period (this excludes small caps).
Once this test is passed, the second test establishes that the security has been traded in at least one third of the trading days during the control period. If it does not pass this test, the security could still be chosen if it were one of the top 20 securities by market capitalisation.
The various documents that are published by Sociedad de Bolsas, such as reports on liquidity, free float, betas and correlations, are the basic materials used by the members of the Technical Advisory Committee when they make their decisions.
Who are the leading firms in it or sectors?
Banco Santander had the largest weighting in the Ibex last year, but it made twice as much underlying profit in Latin America as in Spain, while Zara owner Inditex derived just 16% of its revenues from Spain in the first half of this year.