The IBEX 35 at a glance
The Iberian Index 35 (IBEX) was established by the Madrid Stock Exchange on January 14, 1992. The index base is calculated back to December 31, 1989, for which a starting value of 3,000 points was defined. The index is managed and calculated by Sociedad de Bolsas. This is a subsidiary of "Bolsas y Mercados Españoles".
This company operates the largest Spanish stock exchange in Madrid. Unlike the DAX, the IBEX 35 is a price index. This means that, for example, dividend payments of the companies in the IBEX do not affect the value of the index.
Weighting of the IBEX 35
In general, the index is considered to be well diversified. There are very many companies with a medium-sized market capitalization.
The companies in the index are of different sizes and consequently also have different importance for the Spanish economy. For this reason, the companies are weighted in terms of their market capitalization. This means that the large companies have more influence on the index than the smaller ones. This system is applied to all modern indices.
The financials and utilities sectors dominate the IBEX 35. In addition, the telecommunications and consumer staples sectors (cyclical consumption) are also highly weighted.
The largest company in the index is Iberdrola SA. This energy provider has a market capitalization of $66 billion as of January 2022. At the other end of this list is the pharmaceutical group Pharma Mar SA, which is worth just under a billion on the stock market.
The difference between the largest and smallest companies in the index is extraordinarily large. For example, the top 5 companies are responsible for more than 50% of the index movement.
The most famous companies from the IBEX 35
Most of the companies in the IBEX 35 are unknown to German investors, but there are some companies that almost everyone has heard of. The banks Santander and BBVA, for example, are known worldwide. Santander became the largest bank in Spain after several mergers and acquisitions.
The Financial Stability Board has also classified it as a "systematically important financial institution". BBVA is the second largest bank in Spain. Especially in Latin America, this financial institution has many customers and a high profile.
The textile company Inditex owns many well-known fashion brands. These include Zara, Pull & Bear, Massimo Dutti and Bershka. The telecommunications group Telefónica operates in Europe and Latin America and is one of the market leaders there. Telefónica's brands include O2, Movistar and Vivo.
The best and worst days of the IBEX 35
Like every index, the IBEX 35 has had its share of highs and lows. On December 26, 1996 and March 24, 1998, the milestones of 5,000 and 10,000 points were reached. The all-time high of almost 16,000 points was reached on November 8, 2007. This was shortly before the global financial crisis. This caused the index to fall below the 10,000 point mark.
The euro crisis from 2010 onward led to renewed price collapses. Since this sharp price slide, the IBEX has been in a sideways movement between 7,000 and 12,000 points. In January 2022, the index stands at a value of 8,800 points. This is almost 50% below the all-time high from before the financial crisis. The reason for this is Spain's high level of debt and the accompanying weak economic growth.
Performance compared to other indices
The development described above alone is not very meaningful. To better interpret the data, the IBEX must be compared with other indices. Until the global financial crisis in 2007/08, the Spanish index performed similarly to the German DAX and the American S&P500. However, the greater volatility of the Spanish index was striking.
After the financial crisis, strong economic growth set in in America and large parts of the world. This was the reason for ever-rising prices on the stock market. The S&P500, for example, had a value of around 1,500 points before the big crash in 2007. Due to the strong recovery afterwards, the index now stands at 4,700 points.
There has been no such growth in Spain. Over the last five years, the IBEX had a total return of -7%. The global MSCI World gained over 80% in the same period.
What is important for private investors?
There are many exciting companies in Spain. Investing in them has generated very good returns in the past and is likely to do so in the future.
An investment with an ETF in the entire index should be considered very carefully. The historical return is very poor and there are no signs of improvement in the short to medium term. With a global MSCI World or the pan-European Eurostoxx 50, a much higher return can be achieved with less risk.