The Ibex 35 continues on the path of the increases that led it to reach the highs of 2015 last Friday and that it continued to revalidate on the first day of this week, a day in which the rest of the European markets closed with slight declines. In recent days especially, it has shown greater muscle than its counterparts, since it is the only European index, among the main ones, that is currently reaching record trading levels for the year. The annual balance of 14.6% leaves the Spanish reference as the most bullish on the continent, with a profitability that even doubles that of the EuroStoxx 50 (which gains 6.8% in 2024). In addition, the experts who monitor its behavior do not believe that the ceiling price has already been reached and give it 12% upside potential over the next 12 monthsaccording to data from Bloomberg.
The strong rise that the Spanish market is accumulating compared to other continental indices does not make its multiplier less attractive, with a PER (times the profit is reflected in the share price) 11 times by 2024, which remains the second cheapest European index, only behind the Milan index (which is bought at 9.3 times), and with which it continues to offer a discount compared to its historical averages. This striking multiplier is due to earnings forecasts that are also holding up better than those of its European peers. The Ibex’s EPS (earnings per share) is up almost 7% compared to what was estimated in January, compared to the declines in this earnings forecast suffered by the rest of the main European markets (up to 6% in the case of the CAC and 3% in that of the EuroStoxx).
Back to potential, the consensus of experts that brings together Bloomberg expects the index to reach 12,900 points in the coming months, the highest valuation since 2011. In terms of values, 22% of companies have routes above 20%, including banks. Entity valuations have continued to improve throughout the yearbecause they are the most optimistic companies in the index, with an annual increase close to 70% of the stock market in the case of Banco Sabadell, whose shares rose sharply after the possible takeover bid by BBVA.
The good performance of the banking sector, with a weight of up to 30% in the composition of the Ibex 35, is one of the most selective banked, This pull the car hard, although they are not the only ones doing it well. Inditex, which is by far the largest company in the index, also revalidates historical highs and exceeds 50 euros on the stock market. Its annual increase is 27% and its stock market value amounts to 156.8 billion, the highest figure reached by a Spanish company on the stock market.
In a year in which the European Central Bank (ECB) has already made two interest rate cuts (each by 25 basis points), banking entities, a priori, will not they applied as the biggest beneficiary of the stock market, but solid business results are strengthening the confidence of investors and analysts. Joaquín Robles, market analyst, explains in this sense that Spanish banks will play an important role in the evolution of the Ibex 35 during the remaining months of the year.[Lo que haga el Ibex 35] This will largely depend on the evolution of the banking sector in the coming months, as it has a significant weight in the composition of the index. The gradual decline in interest rates will continue to reduce the interest margin, even if this may constitute a threat, The fall in the price of the currency could trigger a rebound in demand for credit“The ability to maintain earnings growth in the coming months will be decisive, as it will help keep its valuations high,” the expert says.
“Then there are other types of securities that have been harmed by the current high interest rate environment and that could boost the Spanish stock market as interest rates continue to fall. Acciona Renovables, Cellnex, Merlin Properties, Colonial or Grifols are examples of companies with high debt or that operate in highly indebted markets,” adds Robles. In fact, Merlin is one of the four Ibex companies with annual caps and Cellnex is close to reaching them. Iberdrola, Iberdrola and IAG complete the list of companies at the annual summits.
Antonio Castelo, an analyst at iBroker Global Markets, shares Robles’ opinion and indicates that, “although it may seem contradictory,” the upcoming scenario could boost the banking sector and, with it, the ibex in general: “The banking sector could benefit from the movements of lower rates, because although a drop in rates would cause their margins to narrow, these entities could also see their business volume increase as companies and individuals take advantage of the possibility of obtaining cheaper financing. We cannot forget that banks have survived more than a decade of zero interest rates, so they have a lot of experience in managing complex situations.
IG’s Sergio Ávila points out the key factors that make the Spanish index perform better than its European counterparts: “Spanish economy shows surprising resiliencedriven by sectors such as tourism and manufacturing. Second, companies listed in the index have delivered strong financial results, adapting well to global economic challenges,” the analyst explains.
In addition, adds Ávila, “Spain has attracted investment flows destined for emerging markets, due to its diversification potential. Finally, optimism about a global economic recovery and the support of expansionary monetary policies have reinforced the positive sentiment,” he concludes.
