«The level of foreign investors in Spanish equities is quite low which creates opportunities»

Six months after the last general election, Spain once again went out to vote in order to end the political stalemate.

The conservative Popular party won the 33% of the vote, making acting prime minister Mariano Rajoy a strong contender to lead the next government. The result contrasted with poll which forecast a shift to the left in favour of Unidos Podemos.

The result means that neither the left or the right hold a majority and party leaders face a number of coalition options similar to those after the elections in December. So far markets seemed to have reacted positively, with Spain’s benchmark Ibex index opening 2.5% higher on Monday.

What does the result mean for investors? Citywire Selectorcanvassed leading managers to find out what is next for the country.

The Citywire AA-rated Jose Ramón Iturriaga, thinks the results show that populism has limited appeal in Span and the stability could attract investment from beyond the country’s borders.

The elections results we knew yesterday, in a first analysis, should have an important impact on the investors’ perception about the Spanish market risk. The result is quite different from the last 20th December and diminish many of the apocalyptic thesis that were drawn in the latest election polls.

In first place this results makes clear that the risk of populism in Spain is limited.  The big loser from the night was the left wind populism coalition which can now bury their dreams of becoming a predominant force in Spain. Also, in relative terms is les meaningful than in other European countries. The Spanish society is, by a great majority, conservative and is not willing to get involved in any venture.

From the markets perspective, we need to point out two things. Firstly, these results are going to be a big surprise which bury the ghosts of a potential anti-system government. And secondly, and perhaps most important is, that the level of foreign investors in Spanish equities is quite low which creates opportunities.

Bearing in mind all this, if this deadlock situation is finally broken without Podemos being part of the government, which is the most likely outcome, Spanish equities will be on the foreign investors’ radars, who should now focus on the fundamentals which until now have been undervalued.

Fuente: Citywire

Artículo completoSpanish election: fund managers eye bargains as ‘anti-system ghosts buried’.

José Ramón Iturriaga
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