While the unilateral independence declaration that followed the referendum in Catalonia saw some volatility in Spanish stocks – as did the aftermath of the December regional election – IBEX 35 Index’ Spanish stocks were down just over 8% in the six months to the end of March almost in line with Europe’s broad-based FTSE Eurofirst Index falling by 6%.
Joaquim Gay de Montellà, president of the Catalan association Promotion of National Work recently said to the Spanish daily El Mundo: “Catalonia needs to form a government, capable of negotiating and agreeing soon in order to attract investments. Otherwise, the region’s economy might struggle from 2020 onwards, with a potential 10-year standoff period”.
However, the latest European Commission predictions saw little to no impact on the wider Spanish economy from the political crisis, raising its 2018 GDP growth forecast for Spain from 2.5% to 2.6%.
Spain’s GDP rose by 0.8% in Q4 2017, and by 3.1% in the whole year (a fourth straight expansion), a figure down two decimals on 2017 (up by 3.3%), a decline the Bank of Spain attributed to the Catalan crisis.
Although the Ibex 35 Index remains nervous about Catalonia’s political instability, it bets that the standoff will not escalate. Spanish Ibex fell by some 2% on 4 October 2017 with Spanish banking groups CaixaBank and Sabadell down by 5%.
Collins Patrimonios’ equity analyst Adam Miquel says: “CaixaBank, Sabadell and even Catalana Occidente are above the minimums of 2 October 2017, erasing all those losses and concerns. Additionally, although some of the largest companies moved their headquarters, key indicators such as earnings, seem to be strong enough to sustain the good performance of these stocks, confirming that the Spanish equity market continues to be strong.”
José Ramón Iturriaga, fund manager of Abante Asesores’ Spanish equity fund Spanish Opportunies, adds: “The Catalan crisis might be beneficial for Spanish assets. On the one hand, the populist party Podemos has fallen down significantly in the polls given its ambiguous approach to the Catalan crisis after having been considered one of the major threats to Europe three years ago. On the other, Spain’s legal security is stronger after the Government took direct control of Catalonia.
Conversely, it has led to instability and social fracture. However the Spanish bond’s differential with the German debt sits at 73 basis points. The Ibex 35 is behaving similarly to its European peers, affected more by sectorial composition than by politics.”