Spanish stocks offer a sunny escape for tech-weary investors

A brutal sell-off in chip stocks over the past month has restored the appeal of old-fashioned markets. The UK’s FTSE 100 hit a record high last week thanks in part to the fact the index contains so few tech companies. But it’s not the only one: Spain’s benchmark index is beating the US and most of its European neighbours for the second year in a row.

The Ibex 35 has risen 15 per cent so far this year, compared with gains of 10 per cent for the Europe-wide Stoxx 600 and 11 per cent, in euro terms, for the FTSE. That follows gains of almost 50 per cent last year.

The index features just one information technology stock, under the “Global Industry Classification Standard” used by many indices, and even that — Indra Sistemas — is more exposed to European defence spending than it is the AI boom. Instead, the Ibex benefits from many of the same characteristics that have boosted the larger UK market.

Foremost among them is a strong coterie of bank stocks. European lenders have become a popular bet for investors looking to reduce their reliance on AI, and Spain is home to the EU’s two largest lenders by market value, Santander and BBVA. Add in domestic players such as CaixaBank and Sabadell, and financial services account for almost 40 per cent of the index.

There is also a local oil company that has benefited from higher energy prices unleashed by the war in Iran. Repsol, which also stands to gain from initiatives to rebuild Venezuela’s oil industry, has been the best performer in the index this year, rising more than 60 per cent.

Unlike the UK, rising energy prices don’t pose such a threat to local consumers. Spain’s electricity market is less reliant on natural gas to set electricity prices, making it more resistant to price shocks. The economic picture overall is fairly bright, with GDP forecast to grow 2.1 per cent this year, according to the IMF, compared with 0.9 per cent for the Eurozone overall.

The all-important tourism industry has indirectly benefited from conflict elsewhere. Spain has welcomed record numbers of visitors as holidaymakers avoid the Middle East and eastern Mediterranean. About 47mn international tourists visited in the first half of the year, up 5 per cent year on year. Wildfires and a crisis at the border between Morocco and the Spanish territory of Ceuta have posed serious challenges but shouldn’t change the country’s longer-term prospects.

As far as AI goes, Spain’s relative isolation from the trend may not last. For one thing, its low electricity prices and ample renewable energy are just the sort of things tech companies prize when siting new data centres. Companies like Iberdrola are pushing to make Spain an AI infrastructure hub. The country’s accidental AI-hedge status then, like any summer holiday, is best seen as a brief, happy break from the norm.

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