Catalonia is voicing its desire for an independence vote as well, potentially heightening volatility in Spanish stocks and country-specific exchange traded funds, including the largest Spain ETF, the iShares MSCI Spain Capped ETF (NYSEArca: EWP).
Spanish stock observers are keeping a close on eye on the situation as Catalonia makes up almost one-fifth of Spain’s gross domestic product and one-quarter of exports. Losing the region would put a significant dent in Spain’s ability to dig itself out of the prolonged slump.
If Catalonia separated from Spain, financial sectors could take a hit, namely Spanish Caixabank and Banco De Sabadell, which are headquartered in Catalonia. Financial services is EWP’s largest sector weight at 41.3%.
“The tension between Spain and Catalonia has been centuries in the making, but the process of the latter seeking independence began in earnest in 2012 when parties seeking independence won a large majority in regional elections,” reports Barbara Kollmeyer for MarketWatch.
Investors can also consider the factor based SPDR MSCI Spain Quality Mix ETF (NYSEArca: QESP) as an alternative to the cap-weighted EWP. The quality factor “captures excess returns to stocks that are characterized by low debt, stable earnings growth and other ‘quality’ metrics,” according to MSCI.
QESP is also heavily exposed to the financial services sector with a weight of 33.5% to that group. The factor-based Spain ETF also offers some leverage to the recovering Spanish consumer with over 10% of its weight going to consumer sectors. [Quality Approach to Country ETFs]
“Analysts are fretting somewhat about what Sunday’s vote could bring. Yvan Mamalet, senior euro economist at Societe Generale, said in a note Friday that while polls are too close to call in Spain right now, greater autonomy for Catalonia, rather than independence, is the likely outcome,” according to MarketWatch.
Spain itself holds national elections in December.
iShares MSCI Spain Capped ETF
