Ahead of winning last year’s general elections, Prime Minister Mariano Rajoy said he was committed to returning Spain to the place where it belongs on the international stage. So far, in terms of the stock market at least, that wish is a long way from being fulfilled. The Ibex 35 is now the worst-performing stock market in the world, having fallen 15.36 percent in 2012.
It is not just that the Spanish stock market is doing worse compared with those of other developed countries: the German DAX has grown 11.6 percent, the US’ S&P 500 index has increased 8.9 percent and France’s CAC 40 is up 0.9 percent this year. And it isn’t just that it has been punished more than other European periphery countries — the Irish and Greek stock markets have risen 9.5 percent and 5.6 percent respectively, while Italy’s and Portugal’s have fallen 4.8 percent and 5.3 percent. The problem is the Ibex 35 is also doing worse than the markets of the likes of Mongolia, Botswana and Tanzania.
“When you talk to potential investors they tell you they like your company but their management board has forbidden them from investing in Spain,” says the head of investor relations of one Ibex-listed bank. “Now only the hedge funds are interested in Spanish shares.”
“The wave of sales on the Spanish stock market reflects the deterioration of the fundamentals in Spain,” says Huw Pill, chief economist for Goldman Sachs in Europe. “Investors are penalizing the listed companies because of their worries over the country risk.”