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Spanish Selloff Presents Investment Opening, Fund Head Says

Spain Selloff Presents Opening as Economy Has `Lot of Potential'

(Bloomberg) -- A selloff of Spanish stocks that briefly pushed the IBEX 35 Index into correction territory presents a buying opportunity, especially for the nation’s banks, according to the head of equity strategy at an $85 billion global asset manager.

“We are viewing it short-term as a bit of an opportunity,’’ PineBridge Investments’ Graeme Bencke said of the decline triggered by Catalonia’s push for independence. “Unless you think this is going to create a significant change in sentiment in business investment then the banks should continue to do pretty well.”

Spain’s benchmark stock index fell as much as 4.4 percent last week, with banks including CaixaBank SA, Banco Sabadell SA and Banco Bilbao Vizcaya Argentaria SA leading declines. Yet Bencke said his positive view on Spain hasn’t been altered by the Oct. 1 Catalan referendum, as the economy is “climbing pretty steadily’’ from a trough and has more room to run. The IBEX rose 0.4 percent on Monday after a senior member in the Catalan administration called for dialogue with Spain.

“We see quite a lot of potential still” in Spain’s economy, Bencke said in an interview in London, while noting that PineBridge hasn’t been actively adding to its Spanish holdings. “The banks is an area we particularly like. That would be the most obvious, top-down place to go.”

Spanish Selloff Presents Investment Opening, Fund Head Says

Bencke, who runs the $234 million PineBridge Global Focus Equity Fund, isn’t alone in his opinion. JPMorgan strategists said Monday investors should buy Spanish equities on dips, while Deutsche Bank analysts led by Ignacio Ulargui added Banco Santander SA to the firm’s top picks among European banks, saying recent volatility has created an opportunity.

Bencke suggests that the Spanish government take a look at Britain as an example of how to tackle the desire for Catalan autonomy.

“If you think about the way the U.K. addressed this with Wales and Scotland wanting greater autonomy, there are models that Spain can follow that don’t mean that it has to be disastrous for the economy,” he said.

Bencke’s other investment themes include France and technology trends:

  • “We like France because we think that some of the softening of labor restrictions will be beneficial,” as well as it being one of the countries in Europe where there is the biggest fundamental improvement in how businesses are thinking of spending
  • Sector-wise, Bencke likes European banks, some industrial stocks, and also global technology shares, where he says he is focused on “isolating trends and seeing where they play out best”
    • Big data is key technology trend he is watching; “ultimately, the value is going to lie with the companies that own the data,” which in addition to “the obvious choices” of Facebook and Google include industrial or retail businesses with large amounts of information
  • Stock markets in general are “relatively fully priced,” according to Bencke, who says now is not the best time to be buying into yield plays such as telecoms and utilities

To contact the reporters on this story: Paul Jarvis in London at pjarvis@bloomberg.net, Beth Mellor in London at bmellor@bloomberg.net.

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Paul Jarvis, Namitha Jagadeesh