The STRIDE Blog

#2 Global Value Investing: Spain

stride-number-2-global-value-investing-spain-blogSTRIDE on Spain

"Spain is currently emerging from an economic disaster into a new industrial age. There are fundamentally strong businesses in Spain that have weathered nine quarters of negative growth. This new era of regeneration could present some great long-term value investment opportunities."

Bolsa de Madrid, IBEX 35 & regional exchanges

Currency: Euro 

Fiscal year: calendar year

Viva España

Spain's economy was particularly badly hit by the 2008 financial crisis; first by the over-inflated property market, then the inevitable crash that followed, while unpaid personal loans fuelled the eurozone sovereign debt crisis. Many major companies were bankrupted and by April 2013, unemployment had risen to 29.16%.

By late 2013, Spain was hopeful for a recovery. In the first quarter of 2014 it was announced that, year-on-year, the Spanish economy had grown by 0.5 percent, ending nine quarters of negative figures. For independent international investors, it's a great time to start looking for fundamentally strong Spanish businesses that are currently undervalued.

Key industry sectors

Tourism is an obvious one; Spain's appeal as a holiday destination continues to endure. In 2013, 60.6 million tourists visited Spain, making it the world's third most visited country.

Car manufacture is seeing a renaissance in Spain with Ford's new €1.5 billion Ford flagship plant completed in Valencia in 2013. Renault, General Motors and Volkswagen too have all upgraded their plants in Spain, transferring production from countries such as Belgium and Korea.

Exports are being lauded as key to Spain's continued recovery overall. Exports grew by 5.2% in 2013, beating the UK - 1% growth - while Germany and Italy saw exports stagnate, and French exports slid by 1.6%.

Spanish Stock Market

The Madrid Stock Exchange, the Bolsa de Madrid, has existed since 1831. It is the largest and most international of Spain's four stock exchanges and owned by Bolsas y Mercados Españoles (BME), the company which runs Spain's securities markets.

The smaller regional exchanges are located in Barcelona, Valencia and Bilbao

The IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, comprising the 35 most liquid Spanish stocks. Initiated in 1992, this index is adminstered and calculated by Sociedad de Bolsas, a subsidiary of BME. It is reviewed bi-annually.

The FTSE-Latibex Index is a European market for Latin Amercian stocks based in Madrid. 

BME itself has been a listed a company since 2006 and an IBEX 35 constituent since 2007. It deals with the organisational aspects of all the Spanish Bolsas and financial markets.

As well as the trading of shares and bonds, BME offers access to a number of other products such as warrants and trackers, and the clearing and settlement of operations. BME is also developing a technological consultancy, mainly providing trading systems.

Operations and Structure

The Spanish Stock Market as a whole includes the Bolsas, the derivatives market and the fixed-income markets. Trading is linked through the electronic Spanish Stock Market Interconnection System (SIBE). This handles more than 90% of transactions. All fixed-income assets are traded through SIBE.

The Madrid Stock Exchange General Index (IGBM) is the principal index and represents the construction, financial services, communications, consumer, capital/intermediate goods, energy and market services sectors.

Trading on SIBE conducted from 09:00 to 17:30 p.m; open outcry from 10:00 to 11:30

Monday through Friday

Trading need-to-knows

Brokerage costs for investors in the Spanish market are among the lowest in the world. Member firms usually charge individual customers between 0.25% and 0.35% of the transaction amount for each order. Services via the Internet may incur even lower fees.

Brokerage fees are deregulated in Spain so costs can vary between firms. There is usually a minimum fee per transaction.

Banks that are members of the Spanish stock exchange have direct access to the market and are specialists in brokerage.

An investor operating via their usual bank or savings bank will, in turn, be charged a further brokerage fee of a similar amount.

Prevailing regulation requires brokers to make their fees public and submit them to the Spanish market regulator (CNMV). 

Stock market fees are reviewed annually by the Stock Exchange Governing Body and IberclearThey are calculated based on the transaction amount. The current fee is €1.10  for transactions of under €300  and up to €13.40 euros for those in excess of €140,000.

Custodial or securities administration costs: The custodial fee usually ranges between an annual 0.25% on the nominal amount of securities in custody, although it is often charged on a quarterly basis. A minimum fee is often included.

Setting up as an independent international investor

 

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Topics: International Investing, Independent Investor

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