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Spanish managers miss the 'rally' of the market for fear of the Government


A good part of the Spanish managers have missed the ‘Rally’ of the Spanish market during the last month for fear of the government. Their mistrust of the Spanish economy and the measures proposed by the member of the left-most Executive, United We Can, It has made them sell throughout the pandemic, and now that they see the stock market recovering strongly, some want to re-engage but it may be too late. The result is that they have sold down and will buy much higher, with the consequent loss of profitability for their investors.

Proof of this is the profitability of the last three months. Except for the background Allianz Bolsa Española, which started when the markets were already depressed and its course could only be upward, Only five Spanish stock funds are positive in that period, with returns that do not exceed 6% at best and all of them independent: EDM, Fidentiis, Gesconsult, GVC Gaesco and Dux, according to Morningstar. However, since the lows before the state of alarm was decreed, the Ibex 35 has appreciated by more than 21%. A ‘gap’ that international managers who have positions in Spain have known how to take advantage of.

According to industry sources, foreign managers have done better than local managers because "are not as influenced by the government's daily disaster by not seeing it constantly in the media and looking at the Spanish situation with more distance ”.

In particular, Spanish managers are terrified of Pablo Iglesias' proposals and Pedro Sánchez's complacency with him. Regarding the leader of Podemos, the sources consulted believe him “capable of anything”, such as fully nationalizing Bankia, raise or put more taxes, continue increasing the deficit with more expenses, repeal the labor reform and even undertake expropriations; initiatives all that, in fact, have been announced by the purple party. With regard to the Prime Minister and leader of the PSOE, they see him "willing to do whatever it takes to continue in Moncloa, as demonstrated by the pact with Bildu."

For this reason, they fear that the economy will sink even more than expected, that companies will lose, that bank delinquencies will skyrocket, and banks will need to increase capital … The result is that they do not trust the Spanish market, which in turn explains that the Ibex is far behind in its recovery compared to the indices of the rest of Europe or the US.

Foreign managers, more isolated in the day to day from the goings-on of Spanish politics, are less concerned about it and invest more based on economic analysis. For this reason, they have taken greater advantage of the 'rally' of the stock market. Their only precaution is being, according to these sources, "Avoid regulated sectors", whose business may be affected in the short and medium term by the future measures of the coalition government, as well as the values ​​highly exposed to emerging markets, where the focus of the pandemic has shifted. As is known, companies in the Ibex 35 depend heavily on Latin America, where the coronavirus is now raging.

In the cumulative of the year, the data is worse even for local managers. On average, Spanish stock funds lose 25.7%, according to Inverco. Only three funds remain green: EDM International Spanish Equity, GVC Gaesco Bolsalíder and Santalucía Ibérico Shares, with increases between 11.2% and 5.4%, respectively. On the contrary, those who do it worse lose up to 33%. At the tail are the funds of the banks and the ‘Value’, very punished in this crisis.


The problem for Spanish managers is not only that they have not bought during these three months, but that they are biased towards Europe or Spain, which has recovered much less than the American market, explains a leading fund analyst. Another factor that has tied their hands and feet is the great command of banking on the funds sector.

In Spanish industry, eight out of every ten euros are controlled by banks and insurers, especially the former. "Surely, many managers saw a very good entry opportunity at the worst time in the market, but their actions lack the desirable freedom of action, since the unified strategy that is imposed on the managers in these cases of high volatility and falls prevents taking more risk ", points Alberto Roldán, economist and manager. Where they have been able to take positions is in the independent boutiques, where the risk policy is much more open. "They are managers very used to 'trading' the positions, so it is easy to deduce that, where significant losses have been generated, there will also have been buybacks", explains this professional.

A manager of one of the large banking firms analyzes from inside the journey of the last three months. “We are in the second most expensive market in history, in the worst economic situation in at least 90 years. I do not think there are many buyers today, except those who are carried away by the market. I think that biases in Spain have made investment difficult, but it does not seem to me that we have missed the ‘rally’ compared to the Americans, ”he defends himself.

In his opinion, American investors have not been more optimistic, "Simply the Fed and the US government sent stronger signals, and the Americans followed those signs in their markets. " His omen is that "There is a lot of battle left and there are too many uncertainties." Many of a global nature and many others from Moncloa and its government partners.


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