IBEX 35 Index: Price Share, History and Forecast
The IBEX 35 is a benchmark index tracking the top 35 most traded and liquid stocks listed in Spanish stock exchanges. It is a market capitalization weighted index adjusted by free float and is tracked globally to determine the position and performance of Spain. As a Euro-denominated index, IBEX 35 is highly susceptible to the majority of the developments in the Eurozone.
Interested in trading the IBEX35 and want to know more about it? This article will guide you through the Spanish index, from its history and forecast to how to trade it in a few easy steps.
What is the IBEX 35 Index?
IBEX 35 is the benchmark stock market index comprising 35 biggest and most liquid stocks listed in the Bolsa de Madrid, which is Spain’s largest stock exchange. Created on January 14th, 1992, it is a relatively new index tracking the Spanish markets.
IBEX 35 Index Definition
IBEX 35 is a free float market capitalization index owned and maintained by financial services company Sociedad de Bolsas, S.A. It is a Euro denominated index, and serves as a domestic and international benchmark index for the Spanish Continuous markets. Real time information regarding this index is calculated, published and disseminated by the Sociedad de Bolsas.
IBEX 35 stock constituents are reviewed twice a year by the Technical Advisory Committee of Sociedad da Bolsas, and any changes to the index composition are made accordingly. Institutional investors from across the world, money managers and retail investors partake in IBEX 335 investing, as the index represents 90% of the cash traded in the Spanish markets.
The primary functions of the IBEX 35 Index are:
- Reflect the behavior of the Spanish stock markets and thereby the de facto representation of the economy
- Form the underlying asset for derivatives (Futures and Options) trading, clearance and settlement in Bolsa de Madrid.
How is the IBEX 35 Calculated?
IBEX 35 is one of the few European benchmark indices which are not capped. Companies having more than 50% of their shares listed on exchanges without any restrictions on trading (free float) are assigned a free float factor of 1. The index value is calculated as follows:
IBEX 35 index =
Total market cap of 35 companies at period T
Total market cap of 35 companies in the prior period (T-1) + adjustment factor ‘J’
Where, Market capitalization of a company = price x (total shares issued – number of shares locked in). The corrective adjustment factor J is added to the prior period market capitalization of the index to offset any abnormal trading patterns observed.
Constituents of IBEX 35 can be categorized into seven sectors:
- The financial services (25%)
- Oil and energy sector (24% )
- Technology and telecommunications (17.5% )
- Consumer goods (15%)
- Basic materials, industry and construction (11%).
- Consumer services (6%)
- Real estate (1.5%)
Constituents of the IBEX 35 index are reviewed semi- annually, in June and December of each fiscal year. Follow ups regarding the same are conducted in March and September each year. Only companies with the highest liquidity and trading volume are eligible for addition in this benchmark.
IBEX 35 Index Today and History
The IBEX 35 history starts in 1992, when the index was first inaugurated. Back then, it was assigned a base value of 3,000 points.
Thanks to national economic growth between 2000 and 2007, mainly driven by the construction and real estate industries, IBEX 35 performed strongly, more so that most over European indexes. It was thus able to reach an all-time-high of over 15,945 in November 2007.
The 2008 financial crisis put an end to this rise for IBEX 35, which closed 7.5% down on 21st January 2008. Since then, the index has gone through series of highs and lows, with the most notable plunge in March 2020 when it went below 6443 points.
As the index tracks 35 of the most liquid stocks traded in the Spanish stock exchange, it is highly volatile. IBEX 35 index’s one year and three year volatilities are 20.19% and 22.55%, respectively. IBEX 35 has an average yearly return of 6.82%. The index has gained 258.61% since its inception in 1992, thereby emerging as a benchmark index for the Spanish stock markets.
The IBEX Index 35 Price Evolution
The IBEX 35 has gained more than 250% since its inception in 1992. The index charts depict the impressive historical performance over the years.
IBEX 35 Index Chart
As one of the most volatile indices around the globe, the IBEX 35 index has witnessed numerous fluctuations over time. However, the overall trend has remained bullish, as evident from its more than 250% gains from its base year value of 3,000 points since its inception in 1992.
The Spanish benchmark index has gained 31.84% over 2021, outperforming the highly regarded U.S. benchmark index S&P 500’s 30.50% returns.
What Influences the Price of IBEX 35 Index?
The IBEX 35 index is highly responsive to any news on the domestic or international front. As the index comprises 35 most liquid stocks, a market pullback or recession patterns can be noticed through the IBEX 35 trends. Factors that influence IBEX 35 price are as follows.
1. IBEX 35 Price and Economic Backdrop
The macroeconomic parameters play a major role in the IBEX 35 performance. The country’s impressive recovery in 2021 is reflected in the benchmark index’s double digit price gains. Spain’s GDP is to reach pre-pandemic levels in 2022, as forecasted by the country’s Economy Minister Nadia Calvino. This has been the driving force behind the bullish stock markets, and impressive IBEX 35 index performance. Strong consumer spending, resulting in increased interest in IBEX 35 investing, should lead to the continuation of this bullish trend.
2. Developments in the European Union
Spain is heavily dependent on its Eurozone counterparts, and thus, is heavily influenced in the event of major geopolitical or economic developments in the region. For instance, the announcement of Brexit in 2016 caused the index to fall 12.40%.
Moreover, in 2019, the index fell below the critical level of 9,000 after the United Kingdom and European Union failed to reach a trade agreement following the Brexit. Furthermore, IBEX 35 took a sharp hit during the Greek debt crisis in 2011, which threatened regional stability during the time. The substantial bailout package provided by the European central bank also caused the currency value to fall, negatively impacting the Spanish economy and stock markets.
3. Global Market Conditions
The IBEX 35 serves as a domestic and international benchmark for the Spanish economy. As international capital inflows and foreign portfolio investments often come in through stock market investments, any development on the global front has a substantial impact on the IBEX 35. Moreover, with 34.89% of GDP coming from exports, Spain’s international relations have a tremendous impact on its stock markets.
4. IBEX 35 and Currency Fluctuations
Spain’s IBEX 35 is a Euro denominated index, and thus, is highly susceptible to major currency fluctuations, as it can trigger a substantial influx or outflow of capital. If the Euro appreciates with respect to major currencies, international investments in the Spanish markets are likely to increase due to relatively higher returns. However, depreciation of the Euro can cause the IBEX 35 index to plummet, as global investments decline.
5. European Central Bank Policies
The monetary policies set by the European Central Bank (ECB) influence the economic growth and development of most of the European countries in which the Euro is the fiat currency. While dovish monetary policies such as reduced benchmark interest rates and increased money supply lead to bullish markets, tightening policies indicate a slowdown.
6. Covid-19 Situation
The Covid-19 pandemic caused Spain to plummet into recession, as the country is heavily dependent on tourism revenues. In fact, the pandemic and consequent lockdowns caused Spain to enter into the worst recession since its civil war in the late 1930s.
The IBEX 35 index lost 9 billion euros due to pandemic in 2020, with banking and tourism deemed as the worst performing sectors. While the economy has improved significantly since then, the emergence of more resilient versions of the virus are expected to have an impact on the index performance in the near future.
The IBEX 35 Companies and Components
As stated above, IBEX 35 includes the most liquid stocks trading on the Spanish stock exchanges. While liquidity is given more importance compared to the size of a company, a minimum market cap is required for a publicly traded stock to be added to the IBEX 35. Moreover, the average capitalization of stock on the index should be higher than 0.30% to be eligible for inclusion. Also, a stock is required to be traded in at least one third of the trading days during the control period (a full six month period between ordinary meetings to decide any potential changes to the index). In case the trading requirement is unmet, companies ranking within the top 20 stocks in terms of market capitalization are also considered.
Sociedad de Bolsas, S.A. reviews the IBEX 35 components quarterly to identify any capital increases through dividend payouts, share buybacks or secondary public offering, mergers and takeovers, etc. The index is then adjusted for such changes to ensure the value represents an undistorted picture of the Spanish economy.
IBEX 35 Index List of Stocks
The table shows the 35 largest and most liquid stocks trading on Bolsa de Madrid.
|AMS||Amadeus IT Group||Tourism||ES0109067019|
|SAB||Banco Sabadell||Financial Services||ES0113860A34|
|SAN||Banco Santander||Financial Services||ES0113900J37|
|COL||Inmobiliaria Colonial||Real Estate||ES0139140174|
|MRL||Merlin Properties||Real Estate||ES0105025003|
|REE||Red Eléctrica de España||Electricity||ES0173093024|
|REP||Repsol||Oil and Gas||ES0173516115|
|SGRE||Siemens Gamesa||Wind Power||ES0143416115|
Should I Trade the IBEX 35 Index? Points to Consider
- Before investing in the IBEX 35 index, note that it comprises 35 of the most volatile stocks trading in the Spanish stock markets. While these might not necessarily be the largest companies based in Spain, they are immensely popular among investors worldwide. While sector classification is not taken into account while determining the composition of the index, the underlying companies can be categorized into six sectors, thereby reflecting the investor-favorite sectors.
- The Spanish markets remain open from 8.30 a.m. to 5.30 p.m. Central European Summer time (GMT +2.00) from Monday to Friday. 8.30 a.m. to 9 a.m. is the pre-market trading hours, while 5.00 p.m. to 5.30 p.m. is the aftermarket trading period. While no trades are executed during this period, investors can place their orders in the pre-market and after-market trading sessions. These trades determine the opening prices of the trading session from 9.00 a.m. The markets close at 5.00 p.m.
- Investors cannot directly invest in the IBEX 35 index. However, several ETFs, mutual funds and contracts for difference (CFDs) trading platforms facilitate such investments. Also, as it is a Euro denominated index, foreign currencies are converted to Euros at the prevailing exchange rate before the investments are processed.
How Can I Trade the IBEX 35 (SPAIN35)?
Investors can bet on the Spanish economy by investing in IBEX 35 ETF or through contracts for difference (CFDs). Given the relatively low brokerage and commission charges on CFD trades, investing in the IBEX 35 index through such instruments can reap relatively higher returns. Here’s how you can trade SPAIN35 CFDs through the ZFX broker.
1 – Register with ZFX
Firstly, go to the ZFX website, and select “Open an account”. Then, fill in the registration form with your personal details. This also includes your phone number, which will be verified by SMS.
After filling out the form, press “Next” at the bottom. Immediately after this step, ZFX will display your MT4 login and password, as well as invite you to download the platform. Indeed, you will use MT4 to trade SPAIN35 and other instruments of your choice.
2 – Make your First Deposit
In order to proceed, select ”Make a deposit” on the next screen displayed. You will then need to choose a payment method, for example Mastercard.
Choose the account type you want, as well as the deposit amount. Then, click on ”Confirm Deposit”. Finally, enter your credit card information before the final payment validation.
3 – Account Verification
You now need to verify your account. You will do so by sending supporting documents.
As shown in the image above, you will need to upload the documents directly to the ZFX website. These will be verified
4 - Trade IBEX35 Index
Once your documents are validated, you can then invest in IBEX35. The Spanish benchmark index CFD is in fact available on the ZFX Platform under “IBEX 35 Index SPAIN35.” Investors can invest then directly in this index through ZFX, which uses an MT4 platform for placing and processing investment orders.
IBEX35 Index Future, Forecast and Predictions
While the index has a bullish long term outlook, the current market uncertainty due to the Evergrande crisis and delicate geopolitical situation can result in a pullback soon. Analysts expect the U.S. markets to witness a market correction, which then might impact major European markets and benchmark indices such IBEX 35.
Bottom Line: Is IBEX 35 Index a Good Investment Now?
In conclusion, we’ve seen that IBEX 35 is a global benchmark index for the Spanish economy. Investors, money managers as well as financial institutions worldwide track it carefully. And given the growth prospects of the economy, analysts expect the index to soar in the long run.
However, the current market volatility and chances of a market correction are expected IBEX 35 index to remain under pressure in the near term.
If you wish investing in the index, you can do so in just a few simple steps through ZFX. This is a leading, regulated and efficient broker to trade IBEX35 as well as many other international assets.