The Ibex 35 just surrendered to last year’s lows, but the coup could go much further. The Russian invasion of Ukraine threatens to sink the Spanish index to levels not seen since November 2020, in full third wave of the pandemic. A disaster that would mean the disappearance of nearly 15,000 million euros of capitalization for its listed companies.
With the first incursions of Russian troops into Ukrainian territory, the Ibex 35 has reached dangerously close to 8,000 points. A level that in intraday lows on Thursday only saved by the narrow margin of 48 integers. However, if the confrontation escalates, analysts are already warning that the collapse of the equity markets could take the selective to around 7,600 points.
“The threat of severe sanctions on Moscow will lead to a large liquidation of positions given the increase in risk aversion in the stock markets and will rotate towards safer assets, ”says Leonardo Pellandini, equity strategist at Julius Baer. The same one that predicts that “the stock markets of the developed markets could lose up to 10% in the short term“.
A withdrawal that could be increased by “the desire of investors to move to the side of liquidity to spend the weekend as calm as possible”, explains Eduardo Bolinches, an analyst at Invertia. His forecast is that the military intervention in kyiv “will be very fast”, which would translate into a punishment that, “in the worst case, will send the Spanish team to 7,700 points” if yesterday’s lows are broken Thursday.
Given the unpredictability of the Kremlin, few observers dare to make predictions about what will be the future of the situation on the eastern border of Europe. However, the portfolio managers who until now have opted en masse for a diplomatic resolution to the conflict are no longer ruling out worst case scenario for your wallets.
And it is that, as Ignacio Fuertes, partner and investment director of Rentamarkets points out, “as we have been warning in the last five years, high-risk events, destabilizing for the economy and financial markets, have become increasingly common“. A reflection with which he has taken the opportunity to highlight the need to build portfolios through “a rigorous risk management process”.
This point becomes a weakness, once again, in the case of the basket of values that make up the Ibex 35. The greater weight of the tourism sector and the bank could play against you. In fact, both were placed among the most penalized in the session this Thursday, in which the Ibex 35 lost 2.86% of its value. A percentage that translates into nearly 4,400 million euros volatilized. Practically, the capitalization with which Banco Sabadell closed yesterday’s session.
Tourist values are once again encountering a new obstacle on their way to a recovery that was still far from reaching levels prior to the arrival of Covid-19. The situation of uncertainty unleashed by Russia promises the cancellation of many tripsin addition to the fact that the airlines have rushed to cancel all their operations in and around the area affected by the conflict.
As far as the financial sector is concerned, the horizon of higher interest rates, which until the day before yesterday seemed imminent, is receding in time. Although European and American entities they do not have much exposure to the countries involved in the conflictit is true that the central banks will have to analyze in detail what the impact of this warlike scenario could be on their economies.
“Cyclical sectors are likely to face a more difficult environment“, without forgetting “the delay of the ECB increases”, according to Stefan Kreuzkamp, director of investments at DWS, in his analysis. In addition to pointing out that the sector could also be impacted by “the unraveling of the relations with the Russian financial system“.
In this sense, the central bankers will have to introduce this new variable into your calculation arrays. And it is that, although everything indicates that inflation will continue to skyrocket due to the effect of the increase in the price of energy raw materials of which Russia is a major exporter, consumption could come to a standstill and cause a collapse of the complex balance that until now had sustained the recovery economic.
Dependency and sanctions
The most optimistic about the most immediate future of the Ibex point out that the Spanish economy is among the least dependent on Russia regarding its foreign trade. Neither in terms of exports of goods nor imports of energy raw materials, which could be a problem for nations such as Italyas recognized by its prime minister, Mario Draghi.
However, sanctions against Moscow that right now are being settled in offices around the world could also become a drag on European stock indices. Although, in this case, in the longer term. “The geopolitical tensions have ramifications in the medium and long term for the countries that receive the sanctions and for those that impose them,” warned Daniel Lacalle, chief economist at Tressis, noting that the return bill on western economies and their companies could lead to a worsening of their balance sheets.
This round-trip penalty scenario would result in less potential recovery from the initial scare for bags, which in recent episodes of warfare have managed to come back without exception six months after the first skirmishes. This has been the case since the First Gulf War, according to data provided by an analysis by Benjamin Melman, global investment director at Edmond de Rothschild Asset Management.
A bad omen that has already been admitted even by the Prime Minister, Pedro Sánchez, and his Minister for Ecological Transition, Teresa Ribera, who have taken it for granted that this war will impact the finances of Spanish families even beyond the energy bill. One more point of weakness for an Ibex 35 that has already lost 6% since the beginning of the year after having lagged behind its European neighbors for two consecutive years.
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