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undefinedPlentiful and timely information to the investor public is an essential prerequisite for market transparency as well as a key driver of long-term success. The maturity of a market can be measured by its transparency and liquidity, two concepts which are closely interrelated.

The Securities Markets Law enshrines transparency as one of the foundational principles of the Spanish market. Its article 35 stipulates the information to be provided by issuers admitted to trading. A Ministerial Order of 18/1/91 regulates the content and form of such published information. Royal Decree 726 of 23/6/89, in its article 14, makes it incumbent upon stock exchanges to disseminate information on market operations, using the most appropriate media in each case. A number of Bolsa and CNMV circulars go into greater detail on the reporting requirements of market participants. Information, accordingly, is one of the securities market issues meriting most regulatory attention.

From the vast amount of data available, we can single out certain variables with a major bearing on listed companies’ prices. Firstly, company earnings and current interest rates, secondly, the international economic setting and, finally, the political and social climate prevailing.

Stock markets value companies on a daily basis using objective means. This valuation is based not so much on the present or past situation of a company as on its future earnings capacity. The market values expectations and translates them daily into real data.

The periodic release of company results and their comparison with past earnings and those of sector comparables provide a basic pointer for investors. As analysts generally arrive at their fair-value estimates by discounting future financial flows, the profit forecasts provided by companies should be read alongside the estimates published in research reports.

Interest rate conduct is another key determinant of stock market performance. Remember that, as a general rule, interest rate rises push down the prices of listed shares and vice versa.

A country’s economic climate both influences and is influenced by the performance of its corporate sector. Investor sentiment as regards the likely evolution of the country’s economy as a whole prompts buying or selling trends in the market which pressure prices upwards or downwards. This economic setting can be tracked via the macroeconomic data published on a regular basis by various organisations. Unemployment figures, inflation rates, consumer behaviour, corporate order books and numerous other indicators have to be factored into stock market forecasting.

Investments in business projects require a framework of stability and confidence for their long-term development. Uncertainty is the enemy of investment. When political and social circumstances preclude a reasonable stability in economic policymaking and corporate sector regulation, companies hesitate to make the investments needed to build up their competitiveness and profitability. In short, macro and microeconomic data and the conduct of international markets must be analysed in the context of a country’s particular political and social juncture.

 

 

 

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