“Long-term investors should enter Ibex’ big names, dividends are very attractive”

By Tania Suárez, in Madrid | Fernando Luque is editor and analyst at Morningstar. In a conversation with The Corner, Luque remarked that it is difficult to know whether the Spanish Ibex has already reached bottom, and added that long-term investments at current market prices seem more interesting.


Wolfang Münchau wrote in the pages of the Financial Times that if Spain can’t reach the deficit target, it will be bad and if it does reach it, it will be worse because it will cause a deep recession. Do you think Münchau is right? He’s right but only to some extent. We must find the way to reduce our debt without excessively damaging economic growth.

Italy has 25% of its debt issuance target for 2012 covered, whereas Spain has covered more than the 46%. Why do you think there are more doubts about the Spanish situation? The Spanish risk premium has indeed increased compared to Italy’s. We can’t find a reasonable explanation to this fact, though. As a matter of fact, the Italian government has significantly reduced its growth forecast as well.

In your opinion, why have all the reforms announced by the Spanish government somehow failed to contribute to recover market confidence? What should the government do, then? That’s a very tough question. I personally think that the European Central Bank has more capacity to restore market confidence in Spain that the country’s own government… the ECB could engage in a stronger campaign of purchasing Spain’s sovereign bonds in the secondary market.

Do you think the Spanish Ibex has reached bottom? In the short-term, it is difficult to anticipate what the markets may do. Among the big companies that we have analysed (Telefónica, Santander, BBVA, Repsol), we found that the current market prices are really interesting for long-term investments, especially if we take into account the great attractive of their dividend yield. However, we are in favour of taking exposure to markets through diversified funds, instead of funds focused in an individual country. This helps to reduce the risk of the investment.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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