Everything that investors feared has come true these days. It is nothing other than the depreciation of the so-called values of Catalonia in the equity markets. With a worse behavior than that of other companies not established in this geographical area. To the point that it seems that there are already many investors who are undoing positions of these stock proposals. Such is the effect of this social and political movement that the losses of the national benchmark, the Ibex 35, are led precisely by these companies. During these days they have fallen with greater intensity than the rest. With depreciation even below 2%.
Within this panorama of Spanish life, it is a bit difficult to bet on listed companies with links or that have their headquarters in Catalonia. You can be affected by instability above usual. As is happening in recent trading sessions. Although in the first place you will have no choice but to identify these values. However, in some cases it will be a simple task because they are on everyone's lips and are very representative of their respective sectors.
But not only can equities and very specifically the Spanish stock market be affected. But on the contrary, what is happening in Catalonia may end up contaminating the valuation of public debt or even the risk premium. Their Collateral damage They are more than you can think of from the beginning. It will be a time where prudence and caution will be highly valued assets to relate to the world of money and investment. Where you will have more to lose than gain during these weeks.
Banks located in Catalonia
Of course, one of the most affected sectors is banking. Represented by two leading financial institutions, such as Banco Sabadell and Caixbank. Its shares have fallen during these days above the average of the stock indices. If it was already a somewhat dangerous segment for your intentions to open positions, it is even more so now. Not surprisingly, they may soon develop a downward trend of complicated resolution. Despite the fact that in both cases it distributes dividends among its shareholders.
On the other hand, you cannot forget in any way that the assumption Ibex of Catalonia it contributes a market capitalization very close to 100.000 million euros. But with a caveat that is very important to take into account from now on. It is none other than that its values have been moving in positive territory since the beginning of the year. With the sole exception of Gas Natural, which is the only listed company that currently shows a price in its shares below the mark in December 2016.
To the point that everything was completely normal. But this week the nerves have taken over the decisions of small and medium investors. Where sales have been imposed on purchases. Although not with the forcefulness that might be expected in such exceptional situations. However, there is one thing and that is that the national markets have not yet had their last word. As a consequence of the events we are experiencing, there is the fear that they will be inclined towards the most negative actions.
Behavior in the markets
In any case, the main Catalan listed companies are beginning to show the sovereign challenge in their price for the moment and enjoy the highest depreciations of the Spanish selective. One of the questions that some financial analysts ask themselves is whether this scenario will continue for the next few weeks. Or if, on the contrary, everything will return to normal. It will be something that we will know for sure in the coming dates. In the meantime, it is very convenient that you refrain from any kind of movements in the equity markets. And much less take positions in these difficult times to relate to the world of money.
Certainly the record does not arouse much optimism among some of the investors. But on the contrary they are reducing their positions in the securities with the greatest connection to Catalonia. In any case, the most valued analysts in the financial market are betting that legality will finally prevail. In which case, there would be no kind of repercussion on the values that are most closely linked to Catalonia. Despite, yes, all the misgivings that may exist in these complicated moments. It is the positive point of these moments for which the national variable income is going through.
Impact on fixed income
Not only the stock market can be involved in these movements. But also in the different products linked to fixed income and very especially to the Public debt or even the risk premium that is climbing positions during the last days. In this sense, the evolution of national bonds receives special attention. A very reliable indicator of the mood among large investors. Well, its evolution has been frankly negative during these days as a consequence of the instability in the panorama of Catalonia. To the point that it has lost value in the financial markets.
In this scenario, the performance of the Spanish ten-year bond has not been the most satisfactory during these weeks. With a fall also in the sovereign debt of the euro zone, as a reflection of these tensions in Catalonia. Well, the national bond has traded with a discount close to 2% during these days. In any case, the impact of the Catalan separatist challenge on Spanish sovereign debt has not really been very relevant. In this week's auction, the Treasury has placed 3-month bills at an average rate of -0,485%. What is especially important, though, is what you can do in the financial markets over the next few weeks. Where without a doubt the movements can be sharpened from these moments.
Rise in the risk premium
Another effect of the social escalation in Catalonia has been the rise in the risk premium. Until reaching levels of 135 basis points, which had not been seen in recent years. This factor can cause investment funds based on fixed income to lose value from now on. In particular, those who contemplate this possibility within their structure. Now it will be necessary to check if this rebound in the risk premium is specific or can be sustained over time. Even climb higher positions to get closer to levels close to 200 basis points. It is another aspect to be aware of in financial markets.
There are many financial analysts who are aware of this relevant economic parameter to record the effects of the crisis that is unfolding in Catalonia. Because in his opinion it will be the most objective sign of the impact of these movements in favor of secession. They allude that they will be more decisive than even the prices of Catalan securities in Spanish equities. With a red line that can be at 150 basis points. In addition, the risk premium can be a factor that helps the stock market go up or down from now on. With greater incidence than in other scenarios that the national economy has gone through.
General scenario of the stock market
In any case, Spanish equities are going through a delicate moment due to the many doubts that are originating among small and medium investors. In this way, the events in Catalonia can represent a excuse to permanently exit the financial markets. Or at least to reduce positions from more defensive approaches. As a strategy to provide you with greater security in the previous months so that this complicated year ends for almost all financial markets.
Because it will be very necessary that have liquidity from now on. With no other objective than to take advantage of the business opportunities that will surely arise. Not only in the stock market, but in a good part of the most contracted financial assets in the world. The only problem you will have is getting the right moment to take positions. Because depending on these levels, you can make your operations more profitable. That is, at the end of the day, the goal you set for yourself in your investment relationships.
The best hope you can have for the last quarter of the year is that the traditional christmas rally. That almost always gives a significant boost to quotes. With revaluations that can improve the margins established in 10%. As long as it is generated as in previous exercises. Although it will depend on its intensity and also on the values chosen for this special occasion. Where, despite all, it is one of the most anticipated moments of the year. Even more than in periods of uptrend.