The Spanish market is positioned today as the most profitable stock market with gains of 16%
Ben Laidler, global markets strategist at the investment platform eToro, made his daily commentary regarding the market. On this occasion, Laidler addressed in his writing the current situation that the European continent is going through, specifically Spain.
So far this year Spain, like Italy, occupies the position of the most profitable stock market worldwide. Records show it has gains of 16%, that is, more than 6% of global equities
Both Spain and Italy have been able to take advantage to the point of benefiting 30% in the fourth quarter compared to last year from the increases in European values driven by the financial environment and also from certain low and economic valuations.
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“As overall macroeconomic ‘fragmentation’ and growth risks cool, they also feature a number of significant differences, from Spain’s exposure to Latin America to luxury stocks and Italy’s M&A activity.” detailed Ben Laidler.
From the perspective of valuations continuing on the cheap path and profits on the rising path, this should build a support network to cope with market volatility. that it cannot be controlled and that it is getting closer and it will arrive in a context in which there will be still high inflation, interest rates rising faster and faster and with the plus that the war with Ukraine continues .
As mentioned lines above, Spain’s exposure to Latin America has allowed noticing certain similarities and differences between both markets.
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Regarding the similarities, in both markets, banks represent a third of them (from Santander to UniCredit). They also have large tourist sectors that collaborate with the increase in values from Aena to Meliá, this is also because the “reopening rebound” continues, as Laidler mentioned, however, the values of the Spanish and Latin American markets continue to receive more than 60% of their income abroad. Even the valuations are cheap by European standards.
“The PER of 9 times in Italy and 12 times in Spain is low. And the valuation gap vis-à-vis the US has increased dramatically in the last decade (see chart).” Ben mentioned.
On the other hand, the high level of exposure that Spanish stocks have against sales in Latin America “has been a mixed blessing this year after a solid 2022,” Ben emphasized. On the part of Mexico, the strength of its market continues firm; although in Brazil the management of Lula’s presidency is being seen.
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Now, on the European continent, Italy has reaped benefits from the rise of luxury in the country, from brands like Ferrari to Moncler. Likewise, the Italian territory when facing low valuations has managed to make mergers and acquisitions such as the battle of KKR and Macquarie for the assets of Telecom Italia.
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