EUR 100.00 For Business Accounts Only

IBERIAN DAILY 20 DECEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACS, CAIXABANK, CHANGES IBEX, ELECTRICITY SECTOR, METROVACESA, SIEMENS GAMESA.

Stock markets hang on
European stock markets continued with gains despite the tightening on public debt markets, which continue to price in the more aggressive tone of the Central Banks, although the US session was negative. In the Euro STOXX, the gains in Energy (Brent recovering sharply) and Insurance stood out, whereas Technology and Consumer Goods ended with the biggest losses. On the macro side, in Germany December’s IFO once again rose more than expected, with increases in the current situation and expectations components. Since the low reached in Sep’22 (84.3), there have been 3 straight rises in readings. In Spain, the Constitutional Court (6 votes to 5) halted the two partial amendments to the reform of the Organic Law of Legal Power and the Organic Law of the Constitutional Court being passed through the Senate. The EU agreed to set a cap on natural gas prices at € 180/MWh for 2023, beginning on 15/02, although this could be reviewed later. From the ECB, J. Nagel called for patience in returning inflation to 2%, as the effects from the rate hikes will take up to 18 months to be seen (he also called for bigger rate hikes). In the US, the NAHB index for December fell unexpectedly, now standing at a low from the past decade (ex-Covid) due to housing costs and rising rates. In Japan, the BoJ’s meeting kept the reference rate at -0.1%, as expected, the short-term interest rate at -0.1% and the Japanese bond yield at 0%, although it raises the yen’s fluctuation range from +/-0.25% to +/-0.50% and will review the functioning of the yield control curve in order to improve market functioning. In a subsequent meeting, H. Kuroda left the door open to raising the accommodative policy if needed due to the pandemic, although he recognised the rising inflation expectations. The divergence between the BoJ (where inflation does not exceed 2%) and the rest of the Central Banks continues to appreciate the yen. In China, the spread of Covid is impeding business normalisation.
What we expect for today
European markets would open with losses, pricing in the rise in debt curves and pressures from monetary policies. We expect defensive stocks to outperform cyclical ones. Currently, S&P futures are down -0.9% (the S&P 500 ended -0.26% lower vs. the European closing bell). Volatility in the US increased (VIX 22.42). Asian markets are falling (China’s CSI 300 -1.6% and Japan’s Nikkei -2.5%).
Today in Germany we will learn November’s production prices, in Mexico October’s retail sales, in the US building permits and housing starts for November and in the euro zone December’s consumer confidence.

COMPANY NEWS

CHANGES IBEX 35. Siemens Gamesa replaced with Unicaja.
Yesterday, the Technical Advisory Committee decided to add Unicaja (with a 80% weighting) after the result of the TOB on Siemens Gamesa was made public and given that the latter will not be included again in the index. The change will be effective on the 27th of December (the index will be adjusted on the 23rd). Although we did not expect Siemens Gamesa to be included again in the index, we placed our bet on CIE Automotive or Almirall.

CAIXABANK, BUY
According to the press, CABK would be considering different options to manage € 4 Bn worth of non-performing assets. These would be the assets included in the real estate firm BuildingCenter, whose net value would be between € 3 Bn and € 4 Bn and would be composed by residential and industrial assets and land, among others.
Positive news. For the time being this would be about the management of these assets, and if the disposal of this € 4 Bn were to occur, according to our calculations, it would reduce the NPL ratio from current levels of 3% to 96.7% of capital) was not reached but the level of 75% was exceeded, it would trigger the exception procedure for delisting takeover bids laid out in the current regulation, which implies that the company will be able to delist SGRE maintaining a purchase market order at the TOB price for a month. This procedure shall be approved at the AGM, with the full delisting process not expected to last for more than six months.
News in line with expectations. Now the order to delist all SGRE shares from the market should be maintained. We change our recommendation to SELL, as the option to accept the TOB now disappears.
Note that the press had stated that the investment fund FWC (which held 0.7% of SGRE) aimed to appeal before the National High Court that the price of the TOB was not “fair”, despite the fact that SGRE itself and the CNMV consider it to be fair. We have had no news on this issue, and thus we downplay the importance and likelihood it could influence the TOB process.