Banking, finance, and taxes
Kissing PIIGS... S&P Downgrades Spain (SNF, EWP, BBVA, STD, REP, TEF)
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Standard & Poor’s just hit the brakes on the markets, a day after cutting Greece and Portugal. The PIIGS are taking another toll, with the cut today being the long-term rating of the Sovereign Kingdom of Spain. S&P’s cut its rating to “AA” from “AA+”and the “A-1+” short-term sovereign credit rating was affirmed. The outlook is negative. S&P’s transfer and convertibility assessment is unchanged at ‘AAA’
We are seeing moves in the main stocks and funds which track Spain: The Ibero-America Fund, Inc. (NYSE: SNF), iShares MSCI Spain Index (NYSE: EWP), Banco Bilbao Viscaya Argentaria (NYSE: BBVA), Banco Santander, S.A. (NYSE: STD), Repsol YPF SA (NYSE: REP), and Telefonica SA (NYSE: TEF).
S&P notes, “Spain is likely to have an extended period of subdued economic growth, which weakens its budgetary position…”
| Stock/Fund | Price | Chg$ | Chg% | 52-Week |
|---|---|---|---|---|
| Ibero-America Fund, Inc (The) | $5.88 | Down 0.19 | Down 3.13% | 4.40 – 8.07 |
| iShares Trust (Barclays Global | $39.08 | Down 0.01 | Down 0.02% | 32.43 – 52.67 |
| Banco Bilbao Viscaya Argentaria | $12.49 | Down 0.50 | Down 3.85% | 9.88 – 19.78 |
| Banco Santander, S.A. Sponsored | $11.79 | Down 0.25 | Down 2.08% | 8.03 – 17.89 |
| Repsol YPF S.A. Common Stock | $22.11 | Down 0.87 | Down 3.79% | 18.03 – 28.65 |
| Telefonica SA Common Stock | $64.55 | Down 1.25 | Down 1.90% | 56.14 – 89.62 |
The negative outlook reflects the possibility of a downgrade if the nation’s budgetary position underperforms more than is currently expected. The move away from a credit fueled economy will now result in longer-term growth from 2010 to 2016 is what S&P thinks will now be about 0.7% rather than 1.0% previously expected; and S&P expects that the nominal GDP will regain the 2008 level by 2015 rather than 2013 previously forecast.
S&P also sees private sector debt at 178% of GDP, above many of Spain’s peers. Also noted is an inflexible labor market, where unemployment is expected to reach 21% in 2010.
You know the rest. High debt, lower GDP, deleveraging, and on and on…
JON OGG
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