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How SA investors can get in on Spain

There are signs that domestic demand is improving.

CAPE TOWN – Spain was one of the countries hardest hit by the Eurozone crisis in 2012. It suffered a housing market crash that nearly caused the collapse of its banking sector, which needed a €41 billion bailout from the EU.

However, there are signs that the EU’s fifth largest economy is starting to recover, and that it is doing so ahead of the Eurozone average. The third quarter of 2014 saw positive GDP growth in Spain for the fifth consecutive quarter, and lifted the country’s annual growth rate to 1.6%.

Although unemployment remains stubbornly high and government debt is estimated to be as much as 85% of GDP, there are signs that domestic demand is improving. This is a positive sign for shares traded on the Madrid Stock Exchange that have been in the doldrums for some time.

Investors can find exposure to this market through the iShares MSCI Spain Capped ETF, which can be traded through the Standard Bank Webtrader platform. This fund tracks the performance of the MSCI Spain 25/50 Index, which is designed to follow the performance of both the large cap and mid cap sectors of the Madrid Stock Exchange.

The fund currently holds 31 stocks, with its biggest exposure being to the financials sector at 47.24% of assets. The largest single holding is Banco Santander SA, which dominates the fund at 21.71% of its portfolio. Another bank, Banco Bilbao Vizcaya Argentaria OR, is the third biggest constituent at 11.12%.

The ETF also has sizeable exposure to utilities (12.54%), telecommunications (12.15%) and industrials (11.10%). The entire telecommunications exposure is however through a single stock – Telefonica SA.

Investors should certainly be aware of the concentration of the portfolio, as the three biggest stocks make up 43% of it. The top five holdings constitute over 54% of the fund.

The ETF has delivered a rocky ride for investors over the last five years, and is essentially flat over that time. After a strong year in 2009, it was negative for both 2010 and 2011, flat in 2012, up again in 2013 and so far down for this year.

The fund offers a dividend yield of 2.86%.

** This is a sponsored education series focused on offshore investing. The content is sponsored by Standard Bank Webtrader and Moneyweb are the content creator.

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