From: lcornel@EIS.CALSTATE.EDU (Louis Cornelio)
Newsgroups: soc.culture.spain
Subject: Ref: Spanish Economy hanging on French Vote
Date: 3 Sep 1992 19:50:57 -0500
Organization: ESPANA-L - soc.culture.spain Gateway
Distribution: world
Reply-To: Louis Cornelio <lcornel@EIS.CALSTATE.EDU>
NNTP-Posting-Host: cs.utexas.edu


On Thu, 3 Sep 1992, Angel Puerta wrote:

 > On the 20th of September, the French will hold  a referendum on the Maastrich
 > treaty that defines the monetary and political union of Europe. Polls are
 > indicating that the Yes/No choice are running even which is significant
 because
 > only 45 days ago the Yes vote was ahead 69 to 31%. A no vote will kill the
 > Maastrich Treaty.
 >
 > Although I find hard to visualize what a No vote would mean in the long term,
 > it is clear the in the short-term a No vote would be a disaster for Spain. I
 > can see the following scenarios:
 >
 > (1) The stock market in Madrid will sink. It is already as low as it was after
 > the worldwide 'crash' of October 1987. There is no confidence of foreign and
 > institutional investors on the Spanish Economy. Inflation is too high and the
 > Public deficit is out of control.  This weak confidence will turn into panic
 > with a No vote.
 >
 > (2) The peseta will have to be devaluated. It is already too high, pushing
 > imports (which contribute to inflation), and making tourism and exports too
 > expensive. I believe that a No vote will push the Peseta at least 10% down.
 >
 > (3) The 'economic adjustments' of Felipe Gonzalez will lose all credibility
 > because they are based on the so-called 'requirements for Monetary Union'
 > outlined in the Maastrich treaty. A No vote will compromise Gonzalez who will
 > have to throw away his adjustments and work out others with a general election
 > looming in the horizon. The economy, already expected to be in dire straits
 (1%
 > growth) for next year will be put on hold until a new economic policy is
 > defined.
 >
 > Regardless, it is always said that there are opportunities in every down
 market
 > and this one is no exception. For Spain, this opportunity comes in the shape
 of
 > closed-end mutual funds. A closed-end mutual fund pools money from investors
 to
 > invest in a specific market. It differs from regular, open-end funds in that
 > the number of shares is fixed and for a new investor to buy shares in the
 fund,
 > some other investor must be selling them.
 >
 > There are three closed-end mutual funds that concentrate on Spain:
 > (1) Growth Fund of Spain (GBF in the New York Stock Exchange)
 > (2) First Iberian Fund (IBF in the Amex Stock Exchange)
 > (3) Spain Fund (SNF - in the NYSE)
 >
 > All of this funds are trading nowadaya at a tremendous discount from
 > net-asset-value (NAV). The NAV is the value of all investments on Spanish
 > companies that the fund holds divided by the number of outstanding shares.
 >
 > For example, IBF's NAV is $8.25/share but it is selling nowadyas for $6.75, an
 > 18% discount. SNF is trading around $9 when 30 months ago it was trading at
 > $33.
 >
 > A no vote on Maastrich will pull down these stocks even more, making them even
 > a better bargain since the underlying securities that the funds hold have a
 > much higher value per share. Possibly making fo a gret investment opportunity.
 >
 > --
 > Angel Puerta
 > puerta@camis.stanford.edu
 >
 > Disclaimer: I do not have any connection to these funds other than owning
 > shares of them

Right you are about the potential in these funds, especially considering
their deep discount.  But how does the underlying economy look? Any
opinions? And the case of SNF is special: it was trading *very* high based
on a lot of Japanese participation. They tended to move in and out in
hoardes, based on their stockbrokers recommendations.

But still very interesting to watch... Always good to buy on bad news!
Louis   lcornel@eis.calstate.edu
From: jcarmona@hpdmd48.boi.hp.com (juan carmona)
Date: Wed, 2 Sep 1992 23:37:22 GMT
Subject: Ref:Guardias Civiles Bastardos
Organization: Hewlett Packard - Boise, ID