Lingering concerns over Spanish banks' bad debts and the likelihood of Spain requiring a sovereign bailout package mean it is too early for investors to raise their exposure to Spanish equities, despite a rebound on the country's stock market, JP Morgan Asset Management writes in a strategy note.
"Company earnings revisions have stabilised, but clarity on banking recapitalisation and sovereign bailout are prerequisites for a move to 'market overweight'," writes JP Morgan Asset Management global market strategist Dan Morris.
Spain's benchmark IBEX equity index has rebounded around 30 percent since touching lows of around 6,000 points in late July - which was when a pledge by European Central Bank head Mario Draghi to do "whatever it takes" to protect the euro drove a sharp rally in equity markets worldwide.
Spanish bond yields also fell on Monday after an audit of banks showed extra capital needs in line with forecasts, but relief was seen as being short-lived due to doubts over when the Spanish government will seek a full sovereign bailout.
According to Thomson Reuters Starmine data, the Spanish stock market has an average 2013 price-to-earnings (P/E) ratio of around 10.1 - broadly in line with a 10.4 2013 P/E ratio for the pan-European STOXX 600 index .
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Keywords: MARKETS EUROPE STOCKSNEWS (SPANISH EQUITIES JPMORG