Spain's IBEX Seen Gaining Ground in 2021 as Economic Activity Normalizes

   By Rodrigo de Miguel 
 

Spain's IBEX-35 index could have a clear horizon in 2021 after a difficult year due to the economic collapse caused by the coronavirus pandemic, according to analyst forecasts.

The index will close this year with a decline of around 14%, hindered by bank and tourism stocks, which have been hit particularly hard by the health crisis due to the strong impact on the economy and significant mobility restrictions.

However, the development of vaccines--whose distribution has already begun in Spain--makes the prospects for the Spanish market more optimistic for 2021, analysts say.

"If Spain can get the virus spread control under control in the first quarter, there is so much pent up demand that the IBEX could rally over 10% in 2021," says Edward Moya, senior market analyst at Oanda. "As Europe returns to pre-pandemic life, travel to Spain will provide a large boost to the economy," he says.

Sectors closely linked to the economic cycle such as banks should see a strong rebound next year as the economic situation normalizes, says Magdalena Bassi, senior portfolio manager at A&G private banking. However, the financial sector is unlikely to reverse the downward trend of recent years, she adds.

"The situation of confinement and social distance will probably result in low rates for longer in Europe and in impaired loans problems for the financial sector, once the subsidies and moratoriums on loans end," she says.

The correction of the Spanish index in 2020 can be explained by the weight of the services sector, especially the financial sector. Banco de Sabadell SA has plummeted almost 64%, Bankinter SA more than 30% and Banco Santander SA almost 27%.

Renewable energy companies are likely to lead gains for the IBEX in 2021, says Dario Garcia, analyst at XTB.

In 2020, the energy group Solaria Energia y Medio Ambiente SA has risen around 245%, the highest of the IBEX-35, while the wind turbines manufacturer Siemens Gamesa Renewable Energy SA has soared around 110%, the second best performing stock this year.

Renewables are set to benefit greatly from fiscal policies in the coming years, says Ms. Bassi from A&G private banking. "The multiples are high in this sector, but probably this expansion of multiples will continue, largely encouraged by sustainable investment," she says.

--Carlos López Perea contributed to this article.

Write to Rodrigo de Miguel at [e-mail]

This story was translated in whole or in part from a ​Spanish-language version initially published by EFE Dow Jones, a partner of Dow Jones & Co.

(END) Dow Jones Newswires

December 30, 2020 10:33 ET (15:33 GMT)

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