The prices of the world indices in March have presented an opposite behavior in the two fortnights of the same. While the corrections were very notable in the first 16 days of the month, in the second fortnight they have recovered a relevant part of the previous adjustment. For example, the Ibex 35 corrected your rating by 30% in the first 16 days, but as of that date a revaluation of more than 11% was noted until the end of March, according to the latest data provided by the Association of Collective Investment Institutions and Pension Funds (Inverco).
This shows that whoever undid positions in the first half of the month, based on the bad market behavior, not only had to assume the losses of those days, but also had not been able to take advantage of the correction of the following days, confirming that the correct strategy Investment is one that focuses its objective on the medium and long term. Fixed income markets also registered reductions in value, with increases in the IRR of long-term public debt, up to 0,54% for the year. 10-year Spanish bond (from 0,30% in the previous month), or - 0,49% for German long-term government debt from -0,61% in the previous month.
On the other hand, the risk premium amounts to 110 basis points. The fear of a global economic recession due to the effects of the crisis caused by the coronavirus pandemic has generated extreme volatility in financial markets, generating notable reductions in value in all indices. The announcement by the European Central Bank (ECB) of a new pandemic emergency purchase program with an amount of 750.000 millones de euros until the end of the year, along with the approval by the US of a US $ 2 trillion economic stimulus program.
Financial assets: high yield
One of the financial assets most affected by the current financial scenario is undoubtedly high yields. Better known as junk bonds, these are investment products that are issued by countries or companies that have received a low rating. by risk assessment agencies and they have to pay higher interest to the investor because they are taking more risk by buying them. In this sense, agencies such as Standard & Poor's, Moody's or Fitch, to name the most representative, rate the corporate bonds according to the security they offer the investor.
In any case, high yield or junk bonds is a product that carries more risks than the rest, as is becoming evident in this new economic crisis. Because it can be understood as a financial asset linked to economic cycles. In the sense that they offer their best profitability in expansionary periods of the economy and, on the contrary, have their worst performance in recessions, such as the one that is being experienced with the arrival of the coronavirus. With volatility that is much more extensive than in other financial asset classes.
Peripheral bonds
It is another of the big losers in this economic crisis because they do not offer investors confidence. As for example, in the specific case of Spanish and Italian bonds that have not stopped losing profitability in recent weeks. To the point that a good part of the small and medium investors have abandoned their positions in these financial assets due to the real risk that they may continue to lose their valuation in the coming weeks. Like the little confidence that they generate between the different agents or financial intermediaries. Being one of the products destined for the investment of what must be absent in these exceptional days for everyone.
While on the other hand, it cannot be forgotten that peripheral bonds are present in a good part of investment funds based on fixed income. Either individually or as part of other financial assets of a different nature. As well as the fact that it is considered an investment intended for the most defensive or conservative investor profiles. But this time not the best companion to make the savings profitable from any kind of investment strategy. With losses in investment funds during the month of March between 10% and 13%. Although on the other hand it has shown a slight recovery in the first days of this month of April.
Emerging Markets
Regarding redemptions, the categories most penalized in March were both short-term fixed income funds and global funds (1.590 and 1.417 million euros respectively). But in any case, it is the emerging stock markets that have the worst prospects in the short term. Because they will suffer more than the major equity markets and they can generate very dangerous capital gains for all small and medium investors. With negative returns that can approach levels very close to 30% or even with higher intensities. In particular, due to the doubts caused in these countries by the debt that they have accumulated for several years. In an environment that is certainly not very favorable for their behavior in the equity markets.
On the other hand, emerging markets are not to enter their positions because they are greater chances of losing money than to win. And therefore, unnecessary risks cannot be taken since in the end the results can be very negative for our family or personal interests. There are very few markets of these characteristics that have resisted the brutal selling current that we have suffered since the first days of March. This is a reflection that a good part of small and medium investors should consider from now on. First of all, to preserve your money over other more aggressive strategies.
Oil dominated by volatility
It could have been one of the refuge values par excellence, but in reality it has not been this way. If not, on the contrary, it has been part of the problem as its price in the financial markets plummeted to the dangerous levels of 20 US dollars per barrel. From this point of view, it is more of a problem than a solution to our investment problems in these difficult days that this new year has brought us. It is a very conducive asset to operate in trading due to the great divergence between its maximum and minimum prices and that allow you to optimize operations more effectively if you have some learning in this kind of movements in the financial markets.
On the other hand, you cannot forget that there has been an agreement between Russia and Saudi Arabia that allows increasing the production of this raw material from now on. And that therefore, and logically, will make the price of a barrel rise significantly. In fact, it is already at levels of $ 30 per barrel and with prospects that it can do so in these complicated trading days. In a new context that will draw the attention of a good part of the small and medium investors who have many doubts about what they have to do these days. At similar levels of other financial assets, such as in the purchase and sale of shares in the stock market or investment funds of any nature and condition. That is, with habits that are completely new for users in our country.
Technology sector values
There is a fact that draws special attention from small and medium investors and is that at the moment the Nasdaq has only depreciated 7% since the first days of the year. This in practice means that tech stocks are not doing badly in the financial markets. If not, on the contrary, and in a certain way, they are acting as safe havens in this new scenario that equity markets are presenting around the world. With some of them even at positive levels and which also opens up to the old continent's trading floors and which are currently the object of the movements of monetary flows.
While finally, it should be noted that the values of the technology sector is one of the segments that has best withstood this significant drop in the stock market. Always above the most traditional indices of the international stock markets. And in any case, it confirms the fact that not all of it is going to be bad news for financial assets in a time of widespread upheaval. If not, on the contrary, positions can be taken to obtain quick gains in these trading sessions. Although with profit margins that are not as high as in other more normal periods, such as until this unforeseen event has occurred. With an important change in our investment habits.
Operations on the Spanish stock market
It is 59,9% more than in the same month as the previous year and 46,4% more than in February
The number of equities trades amounted to 7,61 million in March, which represents a year-on-year increase of 142,3%. While on the other hand, the volume traded in Fixed Income registers a monthly growth of 26,1%. Where 12 IBEX 77.763 PLUS futures contracts were traded on March 35, a daily historical record, excluding expiration weeks.
On the other hand, the Spanish Stock Exchange traded 55.468 million euros in Variable Income in March, 59,9% more than the same month of the previous year and 46,4% more than in February. The number of negotiations in March was 7,61 million, 142,3% more than in March 2019 and 82,9% more than the previous month. In March, BME reached a market share in the trading of Spanish securities of 72,39%. The average range in March was 14,96 basis points at the first price level (16% better than the next trading venue) and 21,43 basis points with a depth of 25.000 euros in the order book (26,1, XNUMX% better), according to the independent LiquidMetrix report. These figures include the trading carried out in the trading centers, both in the transparent order book (LIT), including auctions, and the non-transparent trading (dark) carried out outside the book.
Investment in fixed income
The total volume contracted in Fixed Income was 31.313 million euros in March, which represents a growth of 26,1% compared to February. Admissions to trading, including issues of Public Debt and Private Fixed Income, amounted to 42.626 million euros, with a growth of 19,5% compared to the same month of 2019 and 83,7% compared to February of this year. The outstanding balance stood at 1,59 trillion euros, which implies an increase of 0,9% compared to March 2019 and 2% in the accumulated of the year.
During the month of March trading in the Financial Derivatives market continued to grow. Especially in Index Futures, in a month marked by increased volatility. On March 12, 77.763 IBEX 35 PLUS futures contracts were traded, a daily historical record, excluding expiration weeks. The volume of Futures on IBEX 35 increased by 74,6% and in Futures Mini IBEX by 200,8% compared to the month of March of the previous year. In Stock Options, March was the third consecutive month of growth compared to the same period in 2019, with an increase of 60,4%. While on the other hand, activity in the BME Derivatives Market registered a year-on-year growth of 17,8%.
Contracting of sustainable bonds
BME, through the Bilbao Stock Exchange, admits today for negotiation the new issue of sustainable bonds launched by the Basque Government for an amount of 500 million euros. The bonds have a 10-year term (their final maturity is scheduled for April 30, 2030) and will accrue an annual coupon of 0,85%. This is the third issuance of bonds linked to Environmental, Social or Governance (ESG) factors carried out by the Basque Government, whose aggregate amount reaches 1.600 million euros. BBVA, Santander, Caixabank, Natixis and Nomura have participated in the placement of the issue.
The Basque Government has an A3 rating, stable outlook, by Moody's; A +, positive outlook, by S&P; and AA-, stable outlook, by Fitch. The broadcast is developed within the framework of the United Nations Sustainable Development Goals (SDG). The categories to be financed correspond in 83% to social programs and in 17% to environmental programs. Among others, the areas and policies of action of the sustainable emission framework of the Basque Government cover: affordable housing, access to essential services such as education and health, social policies, job creation, renewable energy, sustainable transport, prevention and control of pollution environmental and sustainable management of water and wastewater. This issue of sustainable bonds by the Basque Government is in addition to the one carried out last February by the Autonomous Community of Madrid.
Takeover bid on the Spanish stock market
While finally, it should be noted that the Board of Directors of BME today approved the mandatory report on the Public Offer for the Acquisition of shares launched by SIX for 100% of the company's capital. The operation received authorization from the Council of Ministers on March 24 and the CNMV authorized the information brochure for the takeover bid on March 25.
BME's Board of Directors, unanimously, has issued a favorable opinion on the OPA in said report. The Council "positively values the offer price" and considers that "the commitments assumed by SIX and the conditions and precautions imposed by the authorization of the Council of Ministers are, as a whole, adequate to protect the adequate development of the official secondary markets and Spanish systems to which these commitments refer ”.
With the incorporation of these three companies, the Growth segment of the EpM is inaugurated, which is intended for companies with a broader trajectory in all types of sectors.
The two new partners in this BME program are the Southern Spain Business Association, CESUR, which seeks to improve business, economic and social conditions in southern Spain, and AtZ Financial Advisors, a financial advisory boutique specialized in energy projects renewables in Spain and Latam, obtaining debt and equity in financing, project restructuring and M&A operations.
The call for the Pre-Market Environment to receive new companies is open to incorporations. To access the program, companies must be joint-stock or limited companies, with a minimum age of 2 years, present audited annual accounts and provide their business plan for 3 years.
“Since its inception in 2017, the Pre-Market Environment has not stopped growing and is fulfilling its objective of helping companies prepare to make the jump to the stock market and contribute to greater diversification in the sources of financing for the business fabric. Spanish ”, explains Jesús González Nieto, managing director of MAB.