Spain's IBEX-35 Sees Biggest One-Day Drop in Its History After 'Brexit' Vote -- Update
25 June 2016 - 3:26AM
Dow Jones News
By Jeannette Neumann and Carlos López Perea
MADRID -- Spain's IBEX-35 plunged down to close at 12.4%, the
biggest one-day drop for the benchmark index in its history, as the
political and economic uncertainty unleashed by the U.K. referendum
result hammered the shares of Spanish companies.
International Consolidated Airlines Group SA, the airline
company that owns British Airways and Iberia and is listed in
London and Madrid, led the losses on Friday to close down
26.9%.
Friday's drop trumped the previous record for the greatest
one-day plunge on Oct. 10, 2008, when the IBEX-35 fell 9.14%. The
index was launched in 1992.
Bankia SA, which is still majority owned by the Spanish
government after a 2012 bailout, saw its shares go down 20.8%.
Banco Santander SA, which generates about a quarter of its net
profit in the U.K. by selling mortgages and other products, fell
19.9%. Shares in Banco de Sabadell SA, which owns TSB Banking Group
PLC in the U.K., fell 19.3%.
"Brexit" could trigger a sustained depreciation in the pound
versus the euro, analysts say. A prolonged decline in the British
currency will hit Spanish companies' earnings in the U.K. when
translated back into euros when the companies' report quarterly and
annual results.
Albert Coll, institutional policy and market relations director
for Sabadell, said the market was overreacting. TSB will represent
around 20% of Sabadell's net profit by the end of 2016, Mr. Coll
said. If the pound would fall as much as 10% this year, he said,
that would trigger a 2% decline in the bank's net profits. That is
manageable for Sabadell, Mr. Coll added.
Santander Executive Chairman Ana Botín, who ran the British unit
before taking the helm of Santander, said in a statement after the
vote that the bank's commitment "to British businesses, customers
and our people remains as strong as ever." Santander's retail
banking business provides the bank stability, she added.
Spanish telecommunications giant Telefónica SA, which owns
British mobile operator O2, fell 16.1%. Infrastructure group
Ferrovial SA, which has major stakes in four airports in the U. K.
-- including London's Heathrow -- was down 9.3%.
Spain is more exposed to the U.K. than other major European
economies and markets, according to S&P Global Ratings.
Analysts at the credit-rating firm prepared an index of which
countries would have been the most negatively affected by a British
exit, based on financial and economic ties. Ireland topped that
list.
But Spain came in well ahead of the eurozone's other major
economies -- Germany, France and Italy.
Also, Spanish exports of goods and services to the U.K. -- which
includes tourist expenditures -- represents 2.7% of Spain's gross
domestic product.
Write to Jeannette Neumann at jeannette.neumann@wsj.com
(END) Dow Jones Newswires
June 24, 2016 13:11 ET (17:11 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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