The Asian turbulences have affected drastically al European markets during 2015 and we have seen huge falls on many stock titles. The Volkswagen scandal about the manipulation of their engines to pass the environmental tests has also affected the trust on European markets. So, for the little investor it can be an excellent moment to enter the market. These corrections in pricing are usually recuperated in a few months. We believe it is a fake loss of price, so the bullish trend continues.
Catalan elections took place at the end of September where Catalonia was voting for independence. The markets have not reacted to the fact that the parties pro-independence won with the majority of the deputies in parliament. The Catalan parties haven’t been able to form a government. They still have time to negotiate and elect a president before the electoral law obligates them to organize elections again.
The index is made by the 35 biggest companies in Spain. The major actor is the banking sector, where only Santander Bank represents around the 12% of the total capitalization of Ibex-35. Then on second place comes the energy sector, then the telecommunications sector, etc. The Spanish market is quite young in terms of financial education. By this, I mean that it is quite conservative the way investors react to inputs. For example, companies which do not pay dividend are usually penalized during rough times of the economy because are not seen as a guarantee of a future income.
That is why 31 out of 35 companies pay dividend and some struggle to maintain it year after year. The average dividend paid in Ibex-35 it has been historically around the 3.5%. Currently, 15 companies are above that 3.5% dividend due to their loss in the price of the financial stocks. So the leader is Repsol, paying round 9.5% dividend, and the lowest is Gamesa paying 1,45% dividend, both companies in the energy sector.
The Team`s opinion about the current situation of the index is that we believe is a good moment to enter with Repsol, Telefonica, Dia, Tecnicas Reunidas, Endesa, Gas Natural, Enagas, CaixaBank, Iberdrola and Bankia. All these companies pay dividend and are reliable to continue paying it. We also think that their market price is a bit low in all of them and expect some increase in price for the future months.
On the other hand, we would never advise to buy Abengoa B, Santander, BBVA, Ferrovial, ArcelorMittal, Sacyr, Indra, Aena, IAG Iberia and Mapfre. We believe that their market price does not offer any attractive expectations either on price or dividend income, so we would only enter on those positions speculating in short term positions.