Political Doubts Don’t Trade On Spain’s Stock Market

pedro sanchez

The Ibex 35 index has recovered and consolidated the 8.600 level, showing that investors are still not concerned about the political uncertainy.

The final part of yesterday’s session coincided with Pedro Sanchez’s speech. The Ibex 35 rose in the last hour, but not because of what was happening in Parliament. It was thanks to Wall Street, as well as the Eurozone’s activity data for February, which was better than expected.

Even if some analysts and newspapers insist that it does, Spain’s political instability is not being reflected in the performance of equities or fixed income. In fact, the Ibex 35 has lost 10% less than the German DAX over the year. And the risk premium is still below 140 basis points.

Why do markets not reflect this political instability? Basically because the Spanish economy continues to grow over 3% and investors remain confident.

So why was there a big spike in the outflow of deposits in December? The interpretation offered by some newspapers, which establishes a direct link between capital flight and political uncertainty, is arguable. The fact that investors removed 19 billion euros in December has more to do with a seasonal effect that with political instability. Amongst other reasons because the elections were held on December 20th.

This is not to say that the potilical uncertainty will not end up damaging economic growth. In a document sent to the SEC (the US market regulator), Telefonica highlighted political risk as one of the factors which could affect its results.






About the Author

Francisco López
Working for more than 25 years in the world of journalism and communications, Francisco has gained valuable experience at several well-known newspapers such as El Mundo and La Vanguardia. He specialized in economic and financial news before making the leap to the corporate communication sector where he has held several positions: Adviser to the Ministry of Economy, Director of the Bank of Spain’s Communication Department, in addition to his consultancy role at Analistas Financieros Internacionales, where he currently works.