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IBEX 35 price analysis and forecast

IBEX 35 price analysis and forecast

We assess the latest IBEX 35 price action and analyse its top components, sectors and third-party IBEX 35 predictions to outline plausible scenarios for the future.

IBEX 35 evolution was positive over the last 7 days (2.4%), driven by gains of 8.4% in the financial sector. On the other hand, with a decline of 4.3%, the Energy sector undermines the uptrend. Over the past year, the market is down 8.2%, although analysts forecast earnings to grow by 12% annually.

IBEX 35 analysis
Source: CAPEX WebTrader

IBEX 35 has performed negatively so far this year, as macroeconomic conditions worsened, and inflation continued to be a real issue for developed countries.

While other broad-market indexes like the US Tech 100 lost over 30% during 2022, the IBEX 35 losses have not been as severe.

The Spanish economy is projected to grow by 4.8% in real terms in 2022, excluding the effects of inflation, according to the most recent projections from the International Monetary Fund (IMF), while price increases are predicted to be 5.3%.

What does the future hold for the Spanish market, and how could the latest decline in American markets affect IBEX 35 evolution in both the short and mid-term?

In our weekly IBEX 35 evolution analysis, Miguel Rodriguez looks at the major price drivers and latest technical and fundamental developments.

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IBEX 35 evolution

The value of the IBEX 35 Index had been on a downtrend before the pandemic began. The health crisis deepened weaknesses. The index has not been able to recover to pre-pandemic levels.

IBEX 35 fundamental analysis

One reason that could explain this is that market participants expect an increase in interest rates.

Higher rates would result in lower valuations for equities as a result of higher risk premiums. They might also result in decreased profitability for heavily indebted businesses whose interest costs might increase.

ECB announced on 9 June that it will fully taper its asset purchase program (quantitative easing) while it’s also planning to hike interest rates in the region by 0.25% in July.

The measure comes at a point when the median inflation in the region is expected to hit 6.8% by the end of 2022.

By the end of the first semester of 2021, the debt-to-equity ratio among non-financial companies in the IBEX 35 was 1.02, according to the most recent report from Spain's top financial regulator - CNVM. The 1.12x figure that was reported back in the first semester of 2020 is less than this ratio.

What this means is that for every euro invested by shareholders, there’s a euro’s worth of debt. Debt remains a key component for businesses in the country and higher interest rates could have a major impact on their valuation, leading to increased expenditures.

IBEX 35 technical analysis

The Spain 35 chart below shows that the index has been making a series of higher lows since it bottomed in March 2020 at around 5,800, and that could be a positive sign. However, since the November 2021 uptick, triggered by positive news on en-masse vaccinations, the IBEX 35 evolution shows multiple lower highs.

IBEX 35 price prediction
Source: CAPEX WebTrader

The formation of a symmetrical triangle on the Spain 35 chart might indicate a period of consolidation as market participants are struggling to understand what the future holds for Spanish businesses.

The symmetrical triangle tells us that the market is currently undecided about the future direction of the price action. The higher lows and the lower highs also signal that the market seems listless in its direction. Again, the market may seem more inclined to move in the direction of the existing trend.

Many experienced traders prefer to stay on the sidelines for as long as the IBEX 35 evolution is ranging and until there is high certainty that the breakout/down is imminent. Traders should wait for the price to leave, and ultimately close, outside of the triangle to make sure that we are not dealing with a failed breakout.

7700 is the key support level for the future development of the pattern. A breakdown is bearish and IBEX 35 could test the 2020 low. Bulls could wait for a valid break to 9000 points that signals a new uptrend.

As with most forms of technical chart patterns, symmetrical triangle patterns are best used in conjunction with other technical indicators, chart formations, and fundamentals. For this reason, experienced traders use the volume to verify the breakout/down.

The IBEX 35 price evolution is 5% below its 200-day simple moving average. Momentum indicators have been bearish as the Relative Strength Index (RSI) has been standing above 30 while the Moving Average Convergence Divergence (MACD) has just crossed below the signal line and drifted to negative territory.

IBEX 35 components: Winners and losers

The largest winner in 2022 has been the energy sector. It has increased by 23.5 on the IBEX 35 Index. Repsol (REP), with a gain of 48.4% so far this year, has taken the lead (as of the second half of 2022). This company has a weight of 4%, making it a significant factor in the performance of the index.

Along with Repsol (REP), Solaria Energia y Medio Ambiente (SLR) has had a successful year thus far, posting profits of 25.9%.

Since other sectors that are heavily weighted in the index have not been performing well, the energy sector is keeping the index from falling sharply.

Consumer encyclicals have had the poorest year-to-date performance, losing 20%. although leisure products have had the greatest loss (-37%), consumer cyclical is more pertinent due to its higher weight on the index. Amancio Ortega, the richest man in Spain, is the CEO of the garment group Inditex (ITX), which has lost 20% of its value thus far in 2022.

The good news is that this year has seen gains in hotels and entertainment services of 18%, followed by gains in oil & gas equipment and related services of 6.4%.

Nine out of the 35 firms have posted double-digit increases this year, including Telefonica (TEF), which is up 16.4%, and a few banks like Banco de Sabadell (SAB) and Caixabank (CABK).

As of H2 2022, Fluidra (FLUI) was down almost 40.0% year to date, Laboratorios Farmaceuticos Rovi (ROVI) was down over 20.0%, and Cellnex Telecom (CLNXe) was down around 20.0%.

IBEX 35 forecasts 2022 – 2025

Will IBEX 35 evolution overcome the gloomy global macro landscape? Several algorithm-based forecasting services gave their estimates for the future value of the Spain 35 Index.

Wallet Investor held a neutral-to-bearish short-term outlook for the index based on an analysis of multiple technical indicators. The IBEX 35 forecast for Q4 2022 stood at 8054.379 (October close), 8130.147 (November close), and 8125.362 (2022 close) resulting in a limited upside potential from the actual price.

Meanwhile, the site saw the price rise to 8409.207 by the end of 2023. Looking forward, Wallet Investor suggested that the index could gradually move up to 9026 points by the end of 2025. The IBEX 35 five years forecast stands at 9344.237 points at the time of the writing.

GovCapital had a slightly bearish short-term evolution for the IBEX 35, predicting that its value could start Q4 at 7929.418. For December 2022 close, its IBEX 35 price target stood at 8384. The agency forecast IBEX 35 to start an uptrend in mid-November. Could that coincide with a triangle breakout?

Meanwhile, the site’s IBEX 35 forecast for 2023 was bullish and pointed to a price of 13,440 by the end of the year, while the IBEX 35 forecast for 2025 pointed to 30,000 points. Its five-year IBEX 35 prediction suggested the index price could average 44,500 in September 2027.

None of the providers shared an IBEX 35 forecast for 2030.

IBEX 35 key components price prediction

The Spanish IBEX is reviewed in both June and December to determine the eligibility of various companies in the index, and whether they should stay, go, or be warned whether they are close to elimination.

Below is an IBEX 35 price prediction for the top ten components:

Iberdrola SA

The 19 analysts offering 12-month price forecasts for Iberdrola SA have a median target of 49.74, with a high estimate of 56.67 and a low estimate of 40.57. The median estimate represents a +17.14% increase from the last price of 42.46.

The current consensus among 22 polled investment analysts is to buy stock in Iberdrola SA. This rating has held steady since September when it was unchanged from a buy rating.

Inditex

Based on 10 Wall Street analysts offering 12-month price targets for INDUSTRIA DE DISENO TEXTIL in the last 3 months. The average price target is €27.10 with a high forecast of €31.50 and a low forecast of €21.50. The average price target represents an 18.99% change from the last price of €22.78.

Santander

The 18 analysts offering 12-month price forecasts for Banco Santander SA have a median target of 4.13, with a high estimate of 5.33 and a low estimate of 3.09. The median estimate represents a +61.38% increase from the last price of 2.56.

The current consensus among 21 polled investment analysts is to buy stock in Banco Santander SA. This rating has held steady since July when it was unchanged from a buy rating.

BBVA

The 21 analysts offering 12-month price forecasts for Banco Bilbao Vizcaya Argentaria SA have a median target of 6.50, with a high estimate of 8.00 and a low estimate of 4.99. The median estimate represents a +33.42% increase from the last price of 4.87.

The current consensus among 23 polled investment analysts is to buy stock in Banco Bilbao Vizcaya Argentaria SA. This rating has held steady since July when it was unchanged from a buy rating.

Telefonica

The 23 analysts offering 12-month price forecasts for Telefonica SA have a median target of 4.98, with a high estimate of 6.50 and a low estimate of 3.55. The median estimate represents a +28.42% increase from the last price of 3.88.

The current consensus among 27 polled investment analysts is to hold stock in Telefonica SA. This rating has held steady since September when it was unchanged from a hold rating.

IAG

The 20 analysts offering 12-month price forecasts for International Consolidated Airlines Group SA have a median target of 3.48, with a high estimate of 5.47 and a low estimate of 2.32. The median estimate represents a +38.09% increase from the last price of 2.52.

The current consensus among 24 polled investment analysts is to hold stock in International Consolidated Airlines Group SA. This rating has held steady since September when it was unchanged from a hold rating.

CaixaBank

8 Wall Street research analysts have issued 12-month target prices for CaixaBank's shares. Their CAIXY share price forecasts range from $3.10 to $4.50. On average, they expect the company's share price to reach $3.66 in the next twelve months. This suggests a possible upside of 245.3% from the stock's current price.

Market Valuation and Performance

Has the Spanish market valuation changed over the past few years?

Current Market PE

  • Investors are pessimistic about the Spanish market, indicating that they anticipate earnings will not grow as fast as they have historically.
  • The market is trading at a PE ratio of 13.7x which is lower than its 3-year average PE of 97.5x.

Past Earnings Growth

  • The earnings for Spanish-listed companies have grown 5.0% per year over the last three years.
  • Revenues for these companies have grown 3.1% per year.
  • This means that more sales are being generated by these companies overall, and subsequently, their profits are increasing too.

Sector PE

  • Investors are most optimistic about the Telecom sector which is trading above its 3-year average PE ratio of 55.0x.
  • This optimism is likely because analysts are expecting annual earnings growth of 34.7%, which is higher than the past year's earnings growth of 2.3% per year.
  • Investors are most pessimistic about the Energy sector, which is trading below its 3-year average of 11.0x.

Forecasted Growth

  • Analysts are most optimistic about the Telecom sector, expecting annual earnings growth of 35% over the next 5 years.
  • This is better than its past earnings growth rate of 2.3% per year.
  • In contrast, the Energy sector is expected to see its earnings decline by 13% per year over the next few years.

Why is the IBEX 35 index important to traders?

The IBEX 35 is an index of the 35 largest and most actively traded companies listed on the Spanish stock market. Established in 1992, the IBEX 35 serves as a national and international benchmark index, and the major indicator of Spain’s stock market performance.

The IBEX 35 (SP35) includes the largest and most liquid stocks in the local market, dominated by financial, real estate, oil and energy, and consumer goods companies. Some of the most well-known index constituents include the airline holding company IAG, airport operator AENA; utility companies Endesa and Iberdrola; steel and mining giant ArcelorMittal; and the leading banks Bankinter, BBVA, Bankia, Banco de Sabadell, Banco Santander, and CaixaBank.

Traders like to follow the IBEX 35 index because it can offer exposure to substantial market price volatility and significant day-to-day fluctuations. It also serves as the underlying asset for a wide range of derivative financial instruments. The IBEX 35 is known for its volume and volatility and attracts numerous day traders trying to profit from short-term price movements.

How Is IBEX 35 Calculated?

The IBEX 35 is calculated like many other popular stock indices. It uses a basket of 35 companies, and the changes in their stock prices to give a price for the index. It is euro-denominated, calculated in real-time during the trading hours of the Madrid Stock Exchange, and is weighted upon market capitalization.

The index is adjusted by a free float factor, meaning that the biggest constituents of the index have a higher percentage of the calculation, while smaller companies have a much smaller impact. Unlike most other major indices, the IBEX 35 has no weighting limit for a company, so therefore you should be aware of the makeup of the index and who the top 10 companies are. You should also check every six months when the index is reevaluated. This allows the trader to keep an eye on the biggest stocks that will be driving this market either higher or lower.

How to Invest in IBEX 35?

Investing in the IBEX 35 can be done through a multitude of instruments, and which one you choose will drastically affect the potential exposure and potential profit and loss of your positions. With CAPEX.com you can buy stocks and funds and trade CFDs on the most popular assets.

IBEX CFDs

The IBEX 35 is a way to gain exposure to the Spanish stock market without having to analyze the performance of individual companies. The Spanish IBEX 35 financial index typically provides traders with a high degree of liquidity, long trading hours, and tight spreads.

One of the most popular ways to trade the IBEX 35 index is with CFDs (contracts for difference). A contract for difference (CFD) is a contract between a trader and a broker, used to try and profit from the price difference between opening and closing the trade.

No matter whether you have a positive or negative view of the IBEX 35 evolution, you can speculate on price movements in either direction, with the profit or loss you make depending on the extent to which your IBEX 35 analysis and price forecast are correct.

Using CFDs to trade the IBEX 35 will allow you to go long or short in the market without having to deal with conventional exchanges. You trade directly with your CFD broker.

You’ll put down an initial deposit (called margin) to open a larger position, with profits and losses calculated on the full position size, not your deposit. Note that this means your profits or losses could outweigh your deposit amount.

CFDs are commission-free when you trade stock indices with CAPEX.com, as charges are included in the spread.

IBEX 35 futures

The IBEX 35 is able to be traded via futures, which is a derivative of the index itself. Futures markets are on a regulated exchange and have standardized contract sizes. If you have a large enough account, it does present an opportunity as they are leveraged, but keep in mind that each contract can be expensive, and therefore for most retail traders, the CFD market offers a superior alternative.

One of the most common ways that people take advantage of IBEX 35 futures is by hedging their existing portfolios. For example, if you hold several Spanish stocks and are worried about a pullback, you may short the IBEX 35 futures contract to protect yourself on the downside.

If you choose to replicate the IBEX 35 yourself, one Route that you can take is to simply buy stocks on the index. The IBEX 35 components and the weightings of your allocations would be the same as in the actual index, and the information about index components and their percentage weights is publicly available on several financial or investing websites.

The biggest difficulty is picking the right company and the fact that your risk is extremely concentrated. The buying of single stocks can fall victim to a company-specific problem while trading the entire index may help mitigate some of those risks.

While picking a specific company can lead to outsized gains, the reality is that it takes much more in the way of research to become good at it, something that most retail traders do not have the time to do, nor do they have access to all of the pertinent information easily.

It will take time and effort to construct the portfolio. It will also require a significant amount of transaction costs, as you will need to buy 35 individual stock orders to capture the IBEX 35. Commissions, in such a case, can really add up making it very costly to do.

IBEX ETFs

Another thing that we can take advantage of it is an ETF. Exchange Traded Funds (ETFs) are financial instruments that try to mimic the entire sector, index, or even economy by owning bits and pieces of various companies.

To invest in index funds either buy and sell an ETF just as you would do with any other security or speculate on the price movement of the underlying asset with CFD.

Buying shares in an index ETF is one of the most traditional ways for investors to gain access to the whole index. Index ETFs will either buy assets – e.g. stocks appearing in the index – or use derivative instruments like futures contracts to mimic the performance of the underlying.

Alternatively, open a position on an index ETF with a CFD and speculate on the collective performance of the Spain market's top companies and sectors. The most common form of stock index ETF is a weighted tracker, which mirrors the makeup of the index directly.

The Lyxor IBEX 35 (DR) UCITS ETF - Dist is a UCITS compliant exchange traded fund that aims to track the benchmark index IBEX 35 Net Return Index.

The iShares MSCI Spain ETF seeks to track the investment results of an index composed of Spanish equities.

History of the IBEX 35 index

Maintained and regulated by the Spanish company Bolsas y Mercados Españoles (BME), the IBEX 35 Index was first published in its current form on 14 January 1992.

Historically, the IBEX 35 Spanish Stock Index reached an all-time high of 15, 945.70 in November 2007. The IBEX’s record low of 1, 873.58 happened in October 1992.

The list of other milestone dates for the Spanish major financial index includes the following:

  • 14 January 1992 – The IBEX 35 was first published with a base value of 3,000 points
  • October 1992 – The IBEX 35 reached its record low of 1873.58 points
  • 2000 – 2007 – The years of good performance, boosted by domestic economic growth.
  • November 2007 – The IBEX 35 hit its all-time high of 15945.70 points
  • 2007-2009 – The period of high volatility, followed by the global financial crisis
  • March 2009 – The IBEX 35 plunged to under 7,000
  • 2010 – 2011 – The IBEX 35 is depressed, due to Spain’s economic problems and the Eurozone crisis
  • June 2012 – The index stood at 6,065 points
  • 2014 – 2017 – The IBEX 35 climbed back over the 10,000-point mark
  • 2017 – 2020 – The IBEX 35 was stable
  • February – March 2022 – The IBEX 35 lost 40% following the COVID 19 threat
  • March 2020 – June 2021 – The IBEX 35 recovered most of its losses and climbed close to 10,000 points
  • June 2021 – present – The IBEX 35 oscillated around 8,000 points within a symmetrical triangle pattern

Does IBEX 35 Pay Dividends?

Absolutely, IBEX 35 pays dividends. IBEX 35 stock collects the dividends issued by all the dividend-paying stocks in the IBEX 35 — and pays them to you. And, currently, the dividend yield on the IBEX 35 is roughly 2.3%. That means if you invest 10,000 in IBEX 35 stocks or ETF, you will receive 230 a year, paid quarterly, on your investment.

IBEX 35 recommendations — Is It a Buy Now?

IBEX 35 can be a good investment but the right option and timing for you will depend on your investing horizon, expectations, and risk appetite. Unlike stocks, IBEX 35 funds are generally safer during periods of volatility. While your investments will likely take a hit in the short term during downturns, the IBEX 35 like other major indices has a long history of recovering from crashes, bear markets, and recessions.

What does IBEX 35 stand for?

IBEX 35 stands for “Iberian index”, with 35 representing the number of companies listed in the index itself. The IBEX 35 is an index that is often used to represent the overall Spanish economy. The 35 stocks that make up the IBEX 35 are the most liquid and heavily traded stocks in Spain.

Is IBEX a good investment?

It can be. It depends on the trajectory of the Spanish economy, and risk appetite overall, but it is a way to get exposure to one of Europe’s fastest-growing economies. The Spanish index offers much more in the way of momentum than some of its larger competitors in the region.

What are the major indices related to the IBEX 35 index?

Indices that are related to the IBEX 35 include the Madrid Stock Exchange General Index, the Valencia Stock Exchange General Index, and the BCN-100 in Barcelona.

What is the exposure of IBEX 35 companies in Catalonia?

The IBEX 35 in general is not overly exposed to Catalonia. In fact, according to research conducted by the Bolsas y Mercados Espanoles, companies on the index derive only about 1/3 of their revenues in the region. There have been instances of the index selling off drastically due to separatist concerns.

The information presented herein is prepared by Miguel A. Rodriguez and does not intend to constitute Investment Advice. The information herein is provided as a general marketing communication for information purposes only and as such it has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. It does not regard to the specific investment objectives, financial situation or the particular needs of any recipient.

Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research.

Key Way Investments Ltd does not influence nor has any input in formulating the information contained herein. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.

Therefore, Key Way Investments Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance and forecasts are not reliable indicators of future results.