Emerging Market Meltdown Sinks Spain’s Biggest Companies
After years of uninterrupted domination, the old guard at Spain’s Ibex 35 stock index – two mega-banks Banco Santander and BBVA, oil giant Repsol, telecommunications behemoth Telefonica, and utility Iberdrola – is beginning to lose it.
Today the big-five’s combined capitalization represents 45% of the ibex 35’s total capitalization. This may seem like a ridiculously high percentage for five companies compared to most other stock markets, but it is actually its lowest share in decades. Over the last 15 years, the big five’s combined share has averaged 60% and at times even reached as high as 65%.
There are many reasons for this change, including the rise of relative newcomers. Of particular note is the spectacular growth of Spain’s clothing giant Inditex, whose brands include the world’s biggest fashion retailer, Zara, and whose owner, Amancio Ortega, is now the world’s second richest man. Inditex has a market capitalization of €92.7 billion, compared to Santander’s €59.5 billion!
The other main reason for the big five’s shrinking market share is their sinking share prices. Telefonicá and BBVA’s shares are at their lowest point since 2013. Santander’s shares, which have suffered the debilitating effects of countless capital expansions, haven’t been this low since 2012. As for Repsol, the last time its shares plumbed their current depths was in the 1990s. The only member of the big five to escape this rout is Iberdrola.
One thing that all of these companies have in common is their massive exposure to emerging markets — in particular Latin America, whose commodity-rich economies are now suffering the fallout from dwindling Chinese demand. In the aftermath of Spain’s real estate collapse, when opportunities at home were almost non-existent, Latin America’s fast-growing economies were a godsend to many of Spain’s biggest companies. But they are fast becoming a curse.
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