The LYXIB ETF (Lyxor) replicates the Spanish index, which is composed of the country's 35 largest stocks, weighted according to market capitalization and adjusted for the liquidity of each company.
The expenses of the ETF IBEX are 0.3%, in line with the average observed for these products, while the AUM reach approximately 822M €. Replication is carried out directly (physical) and there is a dividend distribution on a semi-annual basis.
Characteristics of the ETF
Alternative ETFs: DXIBD (DX-Deutsche Bank, in Euro)
Index & components
This index, like that of Italy, has the particularity of being overweight in financials, which represent about one third (36%) of its composition (compared to approximately 20% for the stoxx600), including Banco Santander, BBVA and Caixa Bank. Consumer Goods represent also significant weighting (12%), which is mainly due to Inditex, which weighs more than € 100bn in market capitalization, besides Industry (14%) and utilities (13%), including Iberdrola, Ferrovial and Abertis.
The 10 largest companies account for almost two-thirds of the index, in addition to the companies already named, they also include the telecoms giant Telefonica and the oil group Repsol.
The IBEX35 was under pressure in 2016 due to the weak European banking sector and the political problems that left Spain uncertain for months and without government, leading the underperformance versus the Stoxx600. The IBEX declined by 2.2% in 2016-despite a significant catch-up in December-against 1.7% for the stoxx600 for the whole of 2016, while the volatility is rather high which is due to the strong financial weighting.
Spain has seen its macroeconomic situation improve markedly but has suffered from its strong exposure to Latin America under pressure for 2 years, which is particularly linked to Brazil and Venezuela. However, the Brazilian economy is expected to emerge from recession, while Argentina, Colombia and Chile benefit from "pro-business" governments.
Political risks moved away initially with a takeover by the government of Mariano Rajoy and a relative weakening of the populists "Podemos" big losers of the legislative elections of July 2016, but the Catalan referendum could change the situation.
In 2016, Spain has seen its GDP grow by 3.2% keeping the same pace as in 2015. A figure well above that of the euro area, which reached 1.7%. The Eurozone's fourth-largest economy has recorded its fifteenth consecutive quarter of growth since the end of 2013, following a free fall which began in 2008 in the aftermath of the property and financial crisis.
Two factors specific to Spain made this sharp rise in GDP possible: the recovery in the labor market, while between 2013 and the end of 2016, the unemployment rate improved from 27% to 18% and 1.2 million from jobs have been created. The second explanation concerns corporates profitability which has become one of the best in Europe, which is explained by the successful reorientation of Spanish companies towards export after the collapse of the domestic market.
Growth is expected to reach 3% this year.
Latest developments
After a very good start to the year led by the rise in financials, the Spanish index stalled from May and gave up a good part of its gains. Since the beginning of the year, the IBEX35 has increased by only 9.4% (against + 16.3% at the end of May), slightly less than the Stoxx600NR (+10.4%).
In particular, the recent developments are worrying for the country's economy, as the Catalan referendum has weakened the Spanish situation, which was recovering from the setbacks associated with the 2016 elections (lack of government for months). Although the referendum was illegal, unconstitutional and refused by Europe, it nevertheless managed to gather a little less than half of Catalans (42%). The richest region of Spain is therefore divided, and the radicalization of the parties in question prevents any dialogue, which is the only solution to an end to the crisis. Independentists politicians should proclaim independence quickly, while the Spanish government is likely to try to provoke new regional elections and stifle the region financially, by facilitating the relocation of headquarters and taking control of the region's finances.
A worsening of the situation is likely in the coming weeks and could weigh on the economy of the country-if it last too long- including a halt of investments in the region- while a political crisis is not excluded either, Mariano Rajoy's coalition remaining fragile. For the moment, Spanish long-term rates are only moderately up showing that there is no major market concern, at least for now.
