How to trade the Spanish IBEX 35 Index? [Guide]

Spain is one of the largest economies in Europe and in the world. According to April data from the International Investment Fund (IMF), the Spanish economy is estimated at over $ 1 billion. This gives the country 14th place in the world (Poland is 23). It is also worth noting that in Spain, according to government figures, live more than 47 million inhabitants. It is therefore the 30th most populous country on earth (Poland is 38). For this reason, it is worth following the condition of the Spanish stock exchange. It is worth mentioning that the history of the Madrid Stock Exchange dates back to 1831. The most important index aggregating the condition of Spanish companies is IBEX 35. We invite you to read!

Spanish IBEX 35 index

As mentioned before, the IBEX is the most important index of the Spanish market. This index includes the largest and most liquid companies listed on the Madrid Stock Exchange. IBEX-35 was established in 1992, and the base date was December 29, 1989 (with a value of 3000 points).

The index is updated twice a year (in June and December). It is worth noting that the weights in the index are weighted by capitalization, taking into account the ratio based on the number of free float shares. This ratio ranges from 0,1 to 1. The maximum value is intended for companies that have more than 50% of the shares in free float. 

There have been two boom periods in the history of the index. The first was during the dotcom bubble (1995-1999). Then the index increased from the level of 3087 points to 11 points. Then there was a 641-year bear market, which was a break before the next, last big boom on this index. The years 3 - 2005 were another period of rapid increases in indices. The very good economic situation in the construction industry has had a negative impact on the growing hens of shares in construction companies and real estate developers. At the end of 2008, the index reached the value of 2007 points. The bursting of the real estate bubble, the crisis of the countries of "Southern Europe" and the Covid-15 epidemic contributed to Spain's economic problems. This also affected the boom in Spanish companies. As a result, the years 182-19 can be called "lost". 

SPA35 index chart (CFD based on IBEX 35), interval W1. Source: xNUMX XTB.

Index composition

According to data presented by the Madrid Stock Exchange (BME) the index consists of 35 components. At the end of June 2021, the largest components of the index are Iberdrola (13,9%), Santander (11,5%), Inditex (11,5%).

The largest shares are held by companies from the following industries:

• finance - 24,9%,
• mining and energy industry - 24,2%,
• IT and telecommunications services - 17,7%
• consumer goods - 14,8%,

Below is a brief overview of several of the companies included in the IBEX 35 index.

Textile Design Industry SA

The company was founded in 1963 as a family business. The founder of the company was Amancio Ortega, who is currently one of the richest people in the world with a net worth of more than $ 71 billion.  Industria de Diseno Textile it is the largest clothing retailer in the world in terms of revenues (in the Fat Fashion segment). This Spanish company owns brands such as Zara, Pull & Bear, Massimo Dutti, Bereshka, Stradivarius and Oysho. The company sells its products on 216 markets via a stationary chain of stores (less than 7000) and online sales. The most important brand in terms of generated sales is Zara. Together with Zara Home, it generates less than 70% of the company's sales (data for 2019). In the covid 2020, Zara generated 69% of Textil's revenues. The next brand with the highest sales was Bereshka (8,4% of revenues). It is worth mentioning that the company generates over 61% in Europe.

Industria de Diseno Textil SA stock chart, interval W1. Source: xNUMX XTB.

Amadeus

It is one of the largest companies in its industry. Together with Saber, it is included in the "big three" of the GDS market (Global Distribution System). GDS is a system that allows travel agencies to book airline tickets, hotel rooms and book cars. The system allows you to make reservations in real time. The aviation market has the largest share in revenues. Amadeus is therefore an intermediary between airlines and travel agencies.

The origins of the company date back to 1987, when it was founded on the initiative of several European airlines: Lufthansa, Iberia and Air France. It was a "European alternative" to the American company Saber. In addition to connecting to GDS, the company also offers airport management software. Currently, over 480 airlines, 128 airports and over 300 hotel groups cooperate with the Amadeus platform.

Amadeus stock chart, interval W1. Source: xNUMX XTB.

Red Electric Corporation

Red Electrica was founded in 1985. It is a company that offers an electricity transmission service. Additionally, Red Electrica operates and manages the transmission network. It is worth mentioning that the company manages 44 km of the transmission network and has transformer stations with a total capacity of 468 MVA. The company also builds energy storage. The company has a quasi-monopoly position in the segment in which it operates. The company generates stable financial results and has a decent credit rating (A- by Standard & Poor's). It is also worth mentioning that the company does not only operate in Spain. It also operates in countries such as Chile and Peru.

Red Electric's stock chart, interval W1. Source: xNUMX XTB.

Viscofan

The company was founded in 1975 and has been listed on the Madrid Stock Exchange since 1986. It is one of the world's largest producers of artificial casings, which are mainly used by the meat industry. The products include cellulose, collagen, fibrous and plastic casings. Viscofan has 22 production plants in 14 countries. The company sells its products to over 100 countries. The company generates less than 5% of its revenues from cogeneration (it has its own combined heat and power plants). Geographically, the company generates the largest sales in EAP (Europe, Asia and the Pacific), which accounts for 55% of sales. The current capitalization of the company exceeds € 2,7 billion.

Viscofan stock chart, interval W1. Source: xNUMX XTB.

Petticoats

The company was founded in 1972. Its main activity is the development, maintenance and management of gas infrastructure in countries such as Spain, Mexico, Chile, Peru, Albania, Greece, Italy and the United States. The company's offer includes: gas transmission, regasification and gas storage. The company can boast of operating over 12 kilometers of gas pipelines and having 000 compressor stations. The company's capitalization exceeds € 20bn.

Enagas stock chart, interval W1. Source: xNUMX XTB.

Aena

It is a Spanish government majority owned company (via Enaire). The company is one of the largest airport operators in Europe. It operates 46 airports in Spain, operates on the Mexican market (12 airports), Jamaica (2 airports), Colombia (2 airports) in Brazil (6 airports) and holds 51% of shares in London Luton (the license expires in 2031). Therefore, the company earns money in the situation of passenger and cargo traffic at the airports where it is the operator. The company earns both traffic and commercial activities (duty-free shops, restaurants, parking lots, space rental, etc.). The company's capitalization is around € 20 billion.

Aena stock chart, interval W1. Source: xNUMX XTB.

What can affect IBEX-35?

The condition of the Spanish and world economy

Due to the fact that IBEX-35 represents Spanish blue chip companies, companies with geographically diversified revenues dominate. For this reason, even a downturn in the Spanish market will not have a decisive impact on revenues. Such a company is Industria de Diseno Textil SA, which sells its products in over 100 countries around the world. For such a company, the most important thing is the condition of the global clothing sector, which depends on the global change in the level of retail sales. However, the index still includes companies for which Spain is a key market. This is the case of Aena, which generates more than half of its revenues from Spanish airports. 

Financial results of companies

While in the short and medium term, changes in investor sentiment are of key importance for the valuation of companies, the most important thing in the long term is the company's ability to improve its financial results. Increasing revenues, profits and free cash flow (FCF) are the "engine" of increasing the company's valuation. The greater the number of index components will increase the scale of its activity, the greater the likelihood of an increase in the index value.

How You Can Trade the IBEX 35 Index

IBEX-35 Futures

IBEX 35 is one of the leading European indexes. Therefore, it is not surprising that there is a fairly liquid futures contract whose underlying instrument is this Spanish index. There are several types of IBEX 35 futures.

The basic futures contract has a multiplier of € 10. This means that its current face value is € 89.

On August 27, trading in this index amounted to over 7200 units. Mini futures (multiplier 1 €) are also available. At the session on August 27, the mini contract was traded around 1900 units. A micro version of the futures contract was also introduced (the multiplier is € 0,1). Due to the small nominal value, the contract is not very popular. During the session on August 27, no transactions were made on the futures contract.

Contracts for exchange differences (CFDs)

A popular alternative to relatively expensive and more complicated futures is speculation on contracts for difference (CFDs) at Forex brokers. Although Spain is one of the key economies in the world, not all brokers have CFDs on the title index in their offer. Below we present selected offers of brokers on CFDs based on IBEX 35.

Broker
End	Poland	Cyprus, Australia, St. Vincent & Grenadines	Cyprus *
IBEX symbol 35	SPA35	SPA35	IBX / Spain 35 (CFD instrument)
Min. Deposit	PLN 0 (recommended min. PLN 2000 or USD 500, EUR)	50 USD	PLN 500
Min. Lot value	price * 10 EUR	price * 1 EUR	-
Commission	-	-	-
Platform	xStation	MT4, MT5	Plus 500 platform
	REVIEW	REVIEW	REVIEW
	CREATE AN ACCOUNT	CREATE AN ACCOUNT	CREATE AN ACCOUNT

* PLUS500 CY offer

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. From 72% to 89% of retail investor accounts record monetary losses as a result of trading CFDs. Think about whether you understand how CFDs work and whether you can afford the high risk of losing your money.

Stocks and ETFs on IBEX 35

You can also buy individual companies from the index, which gives you a chance to beat the benchmark. An alternative that is increasingly popular with investors are ETFs. They provide exposure to the entire Spanish market, which reduces the investor's time to select the appropriate assets for the investment portfolio.

An example is the iShares Spain ETF, which was created by Blackrock. ETF was founded in 1996. The benchmark for the ETF is the MSCI Spain 25/50 Index. The fund is physically replicated and consists of 18 Spanish companies. It's worth mentioning that iShares Spain ETF has $ 707 million in assets under management (AUM). The annual fund management cost (TER) is 0,51%.

Brokers offering stocks and ETFs

For example on XTB Today, we can find over 3500 equity instruments and 400 ETFs, a Saxo Bank over 19 companies and 000 ETF funds.

Broker
End	Poland	Denmark	Cyprus *
Number of exchanges on offer	16 exchanges	37 exchanges	24 exchanges
Number of shares in the offer	approx. 3500 - shares circa 2000 - CFDs on shares	19 - shares 8 - CFDs on shares	approx. 3 - CFD on shares
The amount of ETF on offer	approx. 400 - ETF approx. 170 - CFD on ETF	3000 - ETF 675 - CFD on ETF	approx. 100 - CFD on ETF
Commission	0% commission up to EUR 100 turnover / month	according to the price list	Spread depends on the instrument
Min. Deposit	PLN 0 (recommended min. PLN 2000 or USD 500, EUR)	0 PLN / 0 EUR / 0 USD	PLN 500
Platform	xStation	SaxoTrader Pro Saxo Trader Go	Plus500 platform
	REVIEW	REVIEW	REVIEW
	CREATE AN ACCOUNT	CREATE AN ACCOUNT	CREATE AN ACCOUNT

* PLUS500 CY offer

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. From 72% to 89% of retail investor accounts record monetary losses as a result of trading CFDs. Think about whether you understand how CFDs work and whether you can afford the high risk of losing your money.

Options on IBEX 35

The investor can also trade as well options that give exposure to an IBEX-35 futures contract. The multiplier for the options is € 1, which is the same contract size as the mini futures. Options with the following due dates are available:

• Options expiring in the next 4 weeks
• Options that will expire in the next 3 months
• 10 next quarterly options (March-June-September-December)
• Up to the next 5 years for options expiring in June and December.

Thanks to the options, the investor is able to create investment strategies that will match the investor's views on the condition of the market. With options, you can hedge a portfolio of Spanish equities by buying a put option on the index. You can also create strategies that assume an increase in volatility (long frame) and a decrease in variability (butterfly, iron condor).

Do you know that…?

Saxo Bank is one of the few Forex brokers that offers vanilla options. The investor has a total of over 1200 options at his disposal (currencies, stocks, indices, interest rates, raw materials). CHECK