The Bank of Spain (BdE) has warned against hazard for the financial stability which would lead to a stock market correction in the price of actions big ones technologicaldue to its size and high weight in stock market indices, particularly in the United States.
The BoE’s opinion appears in the autumn edition of its financial stability report.
“The weight of technology leaders in terms of capitalization in general US stock indices is very high, which increases the likelihood that the idiosyncratic risks of each company will have a systemic impact,” notes the Bank of Spain in its report . .
More specifically, the supervisor specified that this correction could take place if adverse macroeconomic events or if there is a significant downward revision to the earnings forecasts of certain technology companies.
Furthermore, this situation could worsen because certain financial intermediaries, such as international investment fundsthey may be forced to make accelerated sales in times of liquidity stress “by maintaining illiquid or highly leveraged positions.”
In this sense, the BoE specifies in its report that the price/earnings ratio (BYfor its acronym in English) is above its historical average in the case of the S&P 500 and the Nasdaq 100.
“This situation for technology companies has some similarities with the global episode recorded in the early 2000s, known as the ‘dotcom bubble.’ During this period, there was also a sharp rise in the share prices of technology companies, significantly higher than that of the rest of the economic sectors,” analyzes the BoE report.
However, the organization argues that there are also “relevant differences”, such as the fact that the PER is not as high on this occasion and that the technology companies today they are “consolidated”.
As an example of sensitivity to shocks financial markets, the Bank of Spain recalled the temporary episode of tensions at the beginning of August. “Early asset price corrections were amplified by technical factors, such as closed trading carry-trade in yen,” he detailed.
Cyber incidents
Concerning the risks for credit institutionsthe supervisor’s report reflects banks’ growing concern about cyber risks. This concern is framed by the growing penetration of digital technology in the sector and the potential impact of serious incidents.
In this sense, the organization recalled the interruption of technological services that occurred worldwide due to the faulty update of a CrowdStrike security component. This “was a wake-up call about the risks of incident propagation in highly interconnected digital service environments,” the Bank of Spain underlined.
Furthermore, Bank of Spain He also recalled the malicious access to a Banco Santander database, despite the fact that the stolen information did not contain transaction data, which limited the impact of the incident.
