It is a full-blown stock market crash. This is how financial analysts define the current scenario of equity markets. After the average fall in international stock markets is around 30%. With a selling pressure that had not been seen even in the last economic crisis of 2008. Because one of the differences with respect to this is that now the depreciations have occurred suddenly. That is, in just a few weeks and not in six months as happened in the first decade of the XNUMXst century.
Within this general context in which equity markets move, the question that small and medium investors are asking themselves at this time is what the response of the stock markets will be from now on. Because at a time when sales have not been executed these days there is no choice but to wait and wait. With the goal of producing a recovery in financial markets. Although without knowing what the deadlines will be in which everything returns to normal, always bearing in mind that there will be winners and losers in this economic crisis as consequences of the expansion of the coronavirus.
On this aspect, there are different nuances that the analyzes that financial intermediaries are carrying out these days show and that can provide valuable information for investors to make a decision from this very moment. Where they agree in all cases that prudence should be the common denominator of all their investment strategies. After a lot of money has been lost in a very few days. It is enough to remember that, for example, the airline IAG it has gone from trading almost 8 euros per share to almost exceeding the double digit level. Or what is the same, almost a third of its valuation in the equity markets.
A closure is ruled out on the bags
In any case, an eventual closure of the stock market is not the solution to the situation of extreme volatility that the expansion of the coronavirus has generated in the markets. This is the opinion of the stock market supervisor regarding the possibility that the equity markets in our country could close as a result of the exceptional volatility suffered by stock trading places. If not, on the contrary, the CNMV points out that the evolution of the markets is followed in detail and that it will use the tools that the legislation provides if it considers it necessary.
In this sense, the only measure that has been chosen is the suspension of short sales n where the origin of these abrupt falls in the continuous market of our country may be. From this point of view, Spanish investors will no longer be able to speculate in the short term with operations of a speculative nature in the main securities of the equity market. Where until now they have been able to obtain millionaire capital gains. In any case, this measure does not affect investment funds that are still in force and therefore can be hired by investors who believe that stocks around the world will continue to decline from now on.
Impact on fixed income
Another derivative is the one that affects fixed income markets and that has not emerged unscathed from this new scenario. In this sense, it must be remembered that public debt initially avoided the rout suffered by equities. But in the last week investors have fled from fixed income. The interest of the Spanish bond, which evolves inversely to its price, has quadrupled going from 0,23% from last Wednesday to 1% that has touched last Wednesday. Where the peripheral debt is the one that has been most affected by this new scenario in the national economy and outside our borders. With a massive withdrawal in investment funds of these characteristics.
While on the other hand, investment funds based on these financial assets have been greatly affected this week. With depreciation on these funds with margins ranging from 3% to 10% approximately and it cannot be forgotten that these products are part of the strategies of many retirees to improve their pensions. Although it is a financial product whose purpose and term of permanence is not aimed at the short, if not on the contrary to the medium and especially long term. With the possibility that they can recover from the third or fourth quarter of the year, as pointed out by some national managers.
Ibex 35 companies are shielded
It is also very important to note that one of the most relevant measures that the Spanish executive has introduced is to shield the companies that are listed in the selective index of the variable income of our country before possible OPAS by foreign investors. In this sense, it should be noted that it has been announced that the regulations on foreign investment will be reformed "to prevent foreign companies from taking over Spanish companies due to the stock market crash." It is a measure that is part of the royal decree law approved this Tuesday by the Council of Ministers with economic measures to face the coronavirus crisis.
In any of the cases, these measures that have been put in place are unprecedented in the democratic history of our country. To the point that they will affect investor relations with the always complicated world of money, at least in the short term. There has never been a movement of these characteristics in the equity markets around the world and therefore the originality in some of the cases of these emergency plans that will affect many small and medium investors. In any case, they have allowed equity markets around the world to bounce back in a round trip session and above all with maximum volatility. Where the Spanish selective has added 6,41% to stand at 6.498,50 points.
Three scenarios to contemplate
In this sense, Link Securities is currently considering three possible scenarios that the equity markets may develop from now on:
- The economic recovery in "V", which we see less and less likely and which, if it occurs, would favor a strong rebound in the stock markets in the short / medium term.
- The “U” recovery, for the moment the most likely scenario, which would lead to a slower and more selective recovery of the stock markets.
- The recovery in "L", the most negative scenario for the stock markets since, if fulfilled, it would entail many problems for many listed companies, especially those that have an activity more linked to the economic cycle.
From this financial intermediary it is revealed that "the data released last Monday in China, corresponding to the months of January and February, show strong declines in year-on-year terms, something predictable and that it is very likely to be repeated in Western economies, at least for the next few quarters ”.
Measures to calm bags
The European Securities Market Authority (ESMA) has temporarily reduced to 0,1% of the issued capital, compared to the usual 0,2%, the minimum threshold above which investors must inform the relevant national authorities about its short positions in securities listed on the European Union (EU) markets due to the exceptional circumstances related to the Covid-19 pandemic.
In this sense, the European National Securities Market Commission (CNMV) considers that lowering this notification threshold is a precautionary measure that, in exceptional circumstances linked to the current Covid-19 pandemic, is essential for the authorities to supervise the market evolution. While on the other hand, the European markets supervisor stresses that the measure can support stricter actions if necessary to guarantee the orderly functioning of the EU markets, financial stability and the protection of investors.
In this way, the measure is applied immediately and urges holders of net short positions to notify them to the competent national authorities at the close of the session on Monday. Usually, EU regulations oblige to notify the competent national authorities of short positions equivalent to at least 0,2% of the issued capital of a security, although the threshold that obliges to publicly communicate said bearish position is 0,5% .
This temporary obligation applies to any natural or legal person regardless of their place of residence, although it does not apply to shares admitted to trading on regulated markets where the main place for trading the shares is in a third country, as well. as well as market-making or stabilization activities. After the national stock market has risen to about 7%.