Is Ferrovial right: the poor health of the Spanish stock market?

Experts believe that the domestic market has room for improvement, but point out that it continues to attract many foreign investors.

Ferrovial’s change of headquarters to the Netherlands aims, among other things, to ensure that its shares are also traded in Amsterdam and New York, in order to be closer to its investors and clients -mostly international- and to have access to wider and cheaper financing.

This decision by the company chaired by Rafael del Pino calls into question the validity of the Spanish stock exchange as an ideal market for large multinationals with a business spread throughout the world. However, ahead of Ferrovial, whose market capitalization is 19,800 million euros, there are 12 listed companies worth more, including Inditex (92,200 million), Iberdrola (72,600 million), Santander (54,800 million) and BBVA (38,800 million), which have shown no interest in listing directly on Wall Street – some do so through certificates or ADRs – and do not see any inconvenience in Spain being their first market for financing.

Both the opinions of the experts consulted and the data leave the debate open. The sum of the capitalization of the companies listed on the Spanish stock exchange has been worth the same for a decade: one trillion euros, of which 408,000 million correspond to Spanish securities. In recent years, and for various reasons, large companies have been excluded from the stock market: this year Siemens Gamesa, but in the past few years, the departure of MásMóvil, Popular, Telepizza, Abertis, Europac and the market manager BME itself, among others, and the entry of very small stocks into the growth market (BME Growth), especially socimis, stand out. Among the most important additions in recent years were Cellnex, Coca Cola Europacific Partners and Acciona Energía.

Business volume

But where the dwarfing of the Spanish stock market is most noticeable is in business volumes: in 2015 it traded an average of 3,800 million euros per day and in 2022 the average daily trading reached 1,409 million. Roberto Ruiz Scholtes, head of strategy at Singular Bank, believes that “the Spanish market is very small for institutional investors as it barely represents 1% of global capitalization. There are only fifteen or so large companies that allow these investors to take important positions”. He also finds another drawback, a reflection of the economy itself: “It lacks growth stocks and its Ibex 35 index only reflects the old economy of banks, electricity companies and construction companies. There are companies such as Ferrovial, ACS, Cellnex and Acciona Energía that are leaders in their market niches and that, when listed on the Spanish stock exchange, are off the radar of these institutional investors and many analysts,” he concludes.

Juan José Fernández Figares, director of management at Link Securities, is of the same opinion: “I believe that, little by little, the Spanish stock market is becoming too small. The trend is for large stocks to end up trading on more global markets, especially those whose shareholdings are in the hands of large international investors. In the end, liquidity is a plus in any investment. We are moving towards a pan-European market in order to be able to fight Wall Street and probably a reborn London Stock Exchange”.

However, the data provided by BME point to a highly internationalized Spanish market. According to the latest report on share ownership, the participation of foreign investors in listed companies is around 50% of the capital. They also estimate that international investors account for around 80% of the average trading volume.

And they provide other interesting data: “Four Spanish companies are part of the Eurostoxx 50 index: BBVA, Iberdrola, Inditex and Santander. Ferrovial itself is part of the MSCI World index, probably the most widely recognized and followed world index by institutional investors in the United States and around the world. Also within the MSCI family of indices, it has a prominent position in the MSCI Construction and Engineering sector index, where it ranks third in terms of capitalization, below the French company Vinci and the US company Quanta Services”, the market explains.

Ignasi Viladesau, investment director at MyInvestor, believes that there are markets that have earned a reputation for being experts or particularly attractive in a company profile, such as the Nasdaq in technology or the London Stock Exchange for large mining companies. And he points out that “the Spanish market has no obvious disadvantages compared to other developed markets. It is part of the euro zone, a fact that allows it to enter the universe of most institutional investors”. Viladesau adds: “Spain also enjoys a retail investor base comparable to other European countries, although much smaller than the retail base in the United States. However, it is not evident that a Spanish company listed in the U.S. would attract the same retail attention there as it does when listed close to home,” he concludes.

Rodrigo Buenaventura, chairman of the Spanish Securities and Exchange Commission (CNMV), recently backed the Spanish market and its internationalization: “Our market is fully comparable to any other major European market. It is among the four largest markets in the EU, is home to large, highly internationalized issuers, which are active on all continents, and attracts international investors in a much higher proportion than domestic investors”.