Why is it difficult for Ibex to reach 9,000 points?

9,000 points. That’s the magic number the mountain goat has been petting for several weeks., but it still resists and has not been able to resist since the end of May 2022 and has barely closed above that level twice since the pandemic. In the last session of last week, the Spanish selector rose 1.38% to reach 8,914 points. The current inflationary context makes it difficult for the index to move in that direction. “What makes it difficult to exceed 9,000 points on a sustainable basis is the context of high inflation, which forces rates to continue to rise and keep them at restrictive levels. This can affect the economic cycle and business results and these still need to be reviewed. Low,” explains Director of Analysis and Strategy at Renta4 Banco. Natalia Aguirre. “Sooner or later it will come, we are de facto in that moment, but once it reaches that number it will be the key point,” says Víctor Álvarez, head of Variable Income at Tressis investment house.

The heavy weight of the banking and energy sectors has caused the Spanish stock market to appreciate in general in recent years., lagged behind the American or European parquets. “We lag behind the French CAC or the German DAX,” says XTB economist Manuel Pinto. “Ibex has lost almost 35% of its valuation since 2008, one of the indices most penalized by the crisis,” says analyst Víctor Álvarez.

High exposure to the economic cycle

The weak point of the Spanish selector, high exposure to sectors linked to the economic cycle such as finance, energy, industry, raw materials or tourism. “In the absence of consumer companies, when the macroeconomic situation is bad, the index suffers a lot. That’s what happened during the Covid crisis,” says Tressis analyst. To this must be added the heavy weight of the banks, which in recent years have severely restricted their business with the zero rate policy implemented by the European Central Bank. This German DAX around 15,000 pointsIt has companies that export to China and its business structure is more diverse.

But everything could change in 2023, thanks to interest rate hikes to fight inflation.. “We are in a paradise for banks. Industrial activity indexes have rebounded thanks to the rise in the price of money as the labor market strengthens and better-than-expected data are released. The context of interest rate hikes without the economy will allow banks to increase their margins in a recession by reducing their increased default risks,” said Manuel Pinto. ” said.

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China’s reopening is also good news for Ibex’s valuation and Pressure from tourism companies also helps Ibex recover its positions. “Companies connected with raw materials will benefit from the re-start of China and the end of zero covid policy because they will start to consume raw materials and demand more. Regarding tourist values, oil prices stabilize and expect more to arrive in Spain in 2023. tourists shoot at these values,” says Pinto. IAG titles, which are at the bottom of Ibex results in 2022, have gained more than 25% last month, while Meliá shares have gained 30% in the last 30 days.

For all these reasons, the XTB analyst argues that at the moment the Spanish selector has one of the best prospects in Europe for the coming months. “We are heading towards a better-than-expected scenario this year”Summing up Manuel Pinto. Víctor Álvarez, an analyst at Tressis, also believes the 9,000 level will come soon. When asked about the 10,000 barrier, analysts are more suspicious. “This is very difficult, it has not been reached since the outbreak of the pandemic and this has become a psychological limit, it will be very difficult to overcome,” Pinto concludes.