Crisis causes sharp fall in Spanish household investments
The financial crisis has caused a strong decline in investment from households in Spain and a significant restructuring of portfolio assets, according to Julio Segura, president of the Comisión Nacional del Mercado de Valores (CNMV), Spain’s market regulator.
By March 2009, investments by households had declined to a quarter of their volume before the crisis to around 2.5% of gross domestic product, then declined further to 1.7% of GDP by the middle of 2011.
Bank deposits became progressively more important, rising as a proportion of household investments from about 38% of the total in 2007 to almost 50% by mid-2011. Meanwhile, investments in financial market instruments such as shares, bonds and mutual funds have declined from about 45% to 33% of the total in the period.
Within this last group of assets, investment funds declined from 10.2% to 6.4% of the total and equities fell from 24.5% to 17.3%. Portfolios of listed shares were down from 7.8% to 6%, partly as a result of the sharp fall in share values, while fixed income remained relatively stable at between 2.5% and 3% of the total portfolio.
Since the onset of the financial crisis, investor behaviour has gone through three phases, Segura said. In a first stage until March 2009, risk aversion grew as households cut their investment and opted for deposits seen as less risky. In a second phase, during the last three quarters of 2009, investors continued to favour deposits but there was also a rise in other financial instruments including a small improvement for equities.
In the third and last phase which started at the beginning of 2010 and intensified under the impact of the sovereign debt crisis, there has been a sharp increase in risk aversion with investment falling to its lowest point. Investors switched to time deposits which benefited from large outflows from investment funds and other products.