European stock markets uncovered: The ins and outs of the IBEX 35

Julie Brownlee, Fsp Invest, 04 Nov. 2014

Tags: ibex 35, spanish stock market, spanish stock exchange, spain, spanish financial market, spanish economy, stock market index

If you look to the financial markets of Spain, you’ll come across the Bolsa de Madrid, the Spanish stock exchange.

In 1992, the exchange introduced a benchmark stock market index made up of the country’s 35 largest listed companies. This is the IBEX 35.

So what stocks make up the IBEX 35? And what’s the link between the Spanish economy and its stock market?

Let’s take a closer look…

What makes up the IBEX 35?

A staggering 42.21% of financial companies make up the Spanish IBEX 35 stock market index. To put that in perspective, that’s roughly twice as many as any of the other stock market indices in Europe.

Have a look at the chart below. This shows the sectors that make up the IBEX 35…

Chart of the sectors making up the IBEX 35

Another unique aspect of the IBEX 35 is that retail giant Inditex alone contributes to about half of the consumer services sector. So that’s about 6% of the overall index.

The IBEX 35 is very cyclical. Economically sensitive sectors account for 73% of the index.

The biggest defensive sectors are utilities and telecoms. Together they account for around 25%.

The link between the Spanish economy and the IBEX 35

As nearly three-quarters of the index is made up of cyclical stocks, the index is very sensitive to the Spanish economy’s ups and downs.

After the financial crisis, the index also suffered due to its high percentage of financial companies. In 2012, the IBEX 35 hit a nine-year low due to jitters over the Spanish banking sector potentially bankrupting the country.

This also explains why the index recovered so quickly when the threat of the Eurozone breaking up ended.

So there you have it, the ins and outs of the IBEX 35.

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