Fact Book 2019. Summary of the year.
2019 was a positive year for international financial markets with high returns overall in the equity and Fixed-Income markets. That said, neither the expectations of a more sustained recovery of global economic growth, nor the consolidation of the main Central Banks' monetary policies aimed at normalisation, or a return to positive real interest rates bore fruit. In October, the IMF estimated global growth of 3% for 2019, six tenths of a percent lower than in 2018 and the lowest rate of the last decade since the financial crisis.
Turning to the European economy, the Eurozone in particular, the already noticeable slowdown at the end of 2018 worsened with the downturn of the German industrial sector and the uncertainty generated by Brexit. In Spain, the economy confirmed its entry into a more mature phase of the cycle, largely halted by the global and European slowdown, tensions and the fall in international trade as well as internal and external political uncertainty. However, according to the IMF's autumn forecasts, Spain will maintain growth levels expected to exceed the main European economies: GDP will grow by almost 2% in 2019 and 1.8% in 2020 compared to the 1.2% and 1.4% in the Eurozone, respectively.
International Indices and Stock Markets
Up until the end of November 2019, the main global stock indices accumulated returns of around 22%, offsetting the previous year's 10% losses. European stock exchanges also made significant gains: Euro STOXX 50 rose 23.5% up to November with improvements being recorded in the indices of Greece (+47.0%), Italy (+26.9%), Germany (+25.4%), France (+24.8%) and Switzerland (+24.5%). Virtually in line with the pan-European index were the Netherlands (+22.4%) and Belgium (+20.4%), and with returns below 20% were Portugal (+18.4%) Austria (+14.4%), Norway (+11.4%), the IBEX 35 (+13%), and the United Kingdom (+9.2%). The poor performance of the European banking sector (the STOXX® Europe 600 Banks increased 2.1%), and particularly the Spanish, with its considerable weight on the stock market, undermined the performance of IBEX 35.
The North American markets once again closed the year with increases marking new record highs in November, supported by the Federal Reserve's return to an expansive monetary policy with three interventions to decrease interest rates during the year. Up until November, the main indices reached returns in line with the global averages and in some cases were well above. The Dow Jones rose by 20.3%, the S&P 500 gained 25.3% and the Nasdaq 100, the benchmark tech index, 32.8%. Emerging markets rose +9.1% up until November, according to the MSCI EM global index, with Latin America (+10.5%) slightly exceeding this figure.
Investment in Spanish shares: capitalisation, trading, liquidity and dividend yield
The trading prices of securities on the Spanish Stock Exchange performed positively, with the IBEX 35 rising 13% and the IBEX with Dividends obtaining a return of 13.59%, both figures up until December. 66% of the listed securities closed the year registering gains. However, for yet another year, the significant weight of the banking financial sector as a whole penalised the comparison with other international references. The indices of smaller companies performed similarly to the main index. The IBEX Small Cap, made up of 30 companies, gained just over 10% up until December and the IBEX Medium Cap, made up of 20 companies, recorded accumulated annual gains of around 8%. During this period, the IBEX MAB 15 rose more than 40%.
The dividends of the Spanish listed companies are of great importance for returns, which once again became a global benchmark. This year, the Spanish Stock Exchange is once again positioned highly in terms of international leadership with an annual dividend yield at the end of October of 4.6%, according to homogeneous data from MSCI. Over the last 32 years the historical average of the monthly data is 4.04% above the main developed stock exchanges of the world. This is undoubtedly one of the attractions of the Spanish Stock Exchange for foreign investors, who owned 48% of the total value of Spanish listed companies at the end of 2018, 14 points higher than 12 years ago. As for amounts distributed, the total shareholder remuneration in the Spanish Stock Exchange in the form of dividends and other formulas reached 28.232 billion euros in 2019 up until November, 8.9% more than a year ago. The capitalisation or joint market value of the companies listed on the Spanish Stock Exchange once again topped the one trillion euros mark at the end of November 2019, 1.08 trillion to be exact, 9% more than at the end of 2018, reflecting the rise in share prices and the capital increases of some significant companies.
The number of companies admitted to trading in all segments stands at 2,889 companies, a decrease of 123 companies compared to the end of the previous year.
This represents a performance different to that of the share prices, which has followed the contraction in equities where the activity in the European stock markets, and in the Spanish in particular, was lower than last year. The trading volumes in shares on the Spanish Stock Exchange in 2019 presented a drop of 21.8% up until November compared to the same period of the previous year, to stand at 428.978 billion euros. The number of trades behind that cash value was 34.4 million, 16% less than a year ago.
In terms of liquidity, in 2019 the Spanish stock market continued to be the benchmark of its listed securities. Both the price spreads (difference between the purchase and sale prices of the securities) and the depth of the order book (the number of securities associated with the prices of supply and/or demand) remained at very prominent positions. Throughout 2019, the average spread of the securities included in the IBEX 35 index remained at record lows with an average spread in November of 0.0504% (5.04 basis points or bp).
As for ETFs, the Spanish market continues to be penalised because of the different taxation applicable to this investment product depending on whether or not it is listed on the Spanish Stock Exchange or other international exchanges. Up until November, ETFs traded on the Spanish Stock Exchange stood at an amount of 1.538 billion euros, representing a total of 55,766 trades. These figures represent decreases of 45.9% and 30.4%, respectively, compared to the same period in 2018.
Warrants are also traded on the Spanish Stock Exchange, these products allow leverage and the management of investment portfolios. The lack of volatility in the market over the last three years caused the traded products similar to this category to lose their attractiveness in investors' strategies. At the close of November 2019 there were 3,273 issues of outstanding warrants on the market, about 800 more than at the end of December 2018, but with a much lower recorded activity.
Capital investment: investors, share capital increases, secondary offerings and IPOs.
The investor base of the Spanish Stock Market remained extensive and diversified, with foreign investors making up the most important group with a 48% stake in the overall capital of the listed companies, according to the data at the close of 2018, a record high. Up until November 2019, the new flows of investment and financing in shares reached 15.316 billion euros and the Spanish stock market was thirteenth in the world and second in the EU, according to data provided by the World Federation of Exchanges (WFE).
As for new IPOs, these became scarce once again, whereas the use of Venture Capital or Private Equity grew as a financing mechanism via the companies' own resources. In Europe, according to the "IPO Watch", published by the consulting firm PwC, IPO transactions fell during in the first 3 quarters of 2019 by 40% in number and 55% in volume compared to the same nine months of 2018.
The main market of the Spanish Stock Exchange welcomed a new security, Grenergy, in 2019 while the MAB was more active and up until 22 December new companies had been admitted.
As at November 2019, the companies listed on the main market of the Spanish Stock Exchange had carried out 46 capital increase operations from which resources of 10.542 billion euros were obtained.
Between January and November 2019, companies in all MAB segments carried out 60 capital increase operations obtaining resources amounting to 1.617 billion euros, a figure doubling (+112%) the total collected during the same period of the previous year.
MAB: investment and financing
The MAB continues its path to become a preferred option for small and medium-sized growth companies. At the end of November, there were 122 MAB listed companies. Together, its capitalisation is close to 15 billion euros, 30% more than a year ago.
In terms of traded volumes, up until 19 November 2019 shares in Growth Companies worth 146.7 million euros had been exchanged, 34% more than in the same period of 2018. The number of trades giving rise to this figure is 55,969, an increase of 16%. The sharp increase in the trading of shares of REITs in the MAB is also significant. Up until November, the cash volume grew by about 50 million euros and the number of trades executed on the market by more than 60%.
The BME Pre Market Environment (PME) that brings young and innovative companies to the financing and investment ecosystem represented by the securities markets is also taking a more important role.
Corporate operations: IPOs and other M&As
The activity related to mergers and acquisitions was once again very prominent during the year. Up until November 2019, 8 takeover bids had been carried out in the Spanish Stock Exchange affecting the following companies: Barón de Ley, Bodegas Bilbaínas, Telepizza Group, Distribuidora Internacional de Alimentación (DIA), Natra, General de Alquiler de Maquinaria (GAM), Parques Reunidos y BME, all with positive results except the last, which was only submitted at the end of November. The total cash amount of the 7 takeover bids with a positive result reached 835 million euros.
Apart from the takeover bids, merger and acquisition operations took place during 2019 involving companies listed on the Spanish Stock Exchange: Audax Renovables, Inmobiliaria Colonial SOCIMI, SolarPack and Banco Santander, the latter finalising the acquisition of its subsidiary Santander Mexico through an exchange of securities. At the end of November there were two other very significant operations pending completion: the acquisition by Ibería (subsidiary of IAG), of the entire share capital of Air Europa for 1 billion euros and the merger between Mediaset Italia and Mediaset España.
Listed fixed-income: financing and investment
The year was very positive for Fixed Income assets and markets as a result of the change in central banks' bias regarding monetary policy, with the return to quantitative easing policies, interest rate drops and injections of liquidity. In this context, with the adaptation to the transparency and reporting requirements established by MiFID II, the electronic trading platforms of the Spanish fixed income markets significantly increased their activity.
In the main Public Debt markets there was a sharp drop in returns, which was a great surprise due to the low levels at which they began the year. The 10-year North American bond began the year with a return of 2.68% and at the beginning of December it was 1.84%, having touched a minimum of 1.46%. As for the Spanish 10-year bonds, they started the year with yields of 1.42%, rising to a maximum of 1.51% a few days later and from then on began a downhill trend to the impressive minimum level of 0.04% in August. The subsequent rebound led to a yield of 0.49% at the beginning of December.
Turning to the regulated BME Public Debt market that operates on the SEND platform, at the end of November, the outstanding balance of Spanish Debt reached 1.016 trillion euros, with a growth of 1.9% year-on-year and an outstanding balance exceeding 6.4 trillion euros.
Another noteworthy aspect was the return of the Balearic Islands, Castile and León, Andalusia and the Principality of Asturias to the emission markets in 2019.
As a result of all this, the electronic trading of Public Debt on the SEND platform of the regulated AIAF fixed income market experienced a strong momentum, reaching 166.425 billion euros in November, up 73%. The Public Debt traded through SENAF, a multilateral platform for debt market makers, also managed by BME, reached a volume of 152.661 billion euros in 2019 up until November, representing a growth of 62%.
The Corporate Debt market displayed significant growth as a result of the greater activity registered by corporate and financial issuers, which benefited from good liquidity conditions and historically low interest rates. These issuances increased 59% between January and November 2019, to exceed 98.346 billion euros.
The MARF established itself as a reality for business financing. It was created in 2013 to facilitate the Fixed Income issuances of companies of various sizes. Since its beginnings, 78 companies have used it for financing purposes, 6 of which are Portuguese.
The MARF closed the first eleven months of 2019 with an outstanding balance of corporate debt issuances totalling 5.352 billion euros. The total outstanding balance grew 61.2% in 2019, up until November, to stand at 5.353 billion euros.
Derivatives: futures and options
The activity of the MEFF, the BME Derivatives market, increased by almost 3% in 2019 up until November, in an environment of low volatility. Individual stock futures grew 48% and derivative products related to dividend payment hedges doubled in volume.
According to the VIBEX volatility index, the average daily implied volatility of the first eleven months of the year was 13.9%, a fall of 1.1 points compared to 2018 and almost 10 points less than in 2016.
MEFF launched the xRolling® FX futures contracts in June. These are "perpetual" type contracts, which renew automatically at the end of the day and cover 17 of the main global currencies pairs. Trading is carried out over 23 hour day.
The notional outstanding volume of derivatives traded in organised markets around the world grew 26.8% up until June 2019, prolonging the trend of previous years.
Clearing
As a whole, measured in terms of contracts, the activity in the Financial Derivatives segment during the first eleven months increased by 2.9% in 2019 year-on-year. This rise was mainly due to the increase in trading in Stock Futures, Dividend Futures and IBEX 35 Impacto Dividendo Futures.
The Equity segment registered a daily average of 293,521 transactions (purchases plus sales) with a daily average of net cash volume (single side) traded totalling 1.808 billion euros, 19% lower than in 2018, and an average volume of nearly 703 million securities per day. The segment currently has 24 clearing members.
For public debt operations with bilaterally traded repurchase agreements (repos), BME Clearing offers registration and central counterparty services, thus eliminating the counterparty risk for the 25 entities that participate in the clearing house.
During 2019 up until November, the total volume registered reached 333.908 billion with a monthly average of 318 operations, which represents a very significant increase on the 133.569 billion euros and monthly average of 190 operations in the same period of the previous year.
BME Clearing began providing the service for natural gas in the Energy Segment in May 2018. Since then up until November 2019, 29 settlement participants have been added, with a registered volume of 225,000 MWh and an open interest of 721,500 MWh, these figures being much higher than expected.
Derivatives trade repository: REGIS-TR
REGIS-TR, the registry jointly developed by BME and Deutsche Börse (the German Stock Exchange), is one of the largest in Europe with 1,600 open accounts in 2019, processing between 8 and 10 million trading messages a day. Information regarding trades and positions is provided to 38 European regulatory bodies.
