Brazil.- Renta 4 bets on the Ibex 35 for 2021 and sees a potential of 10%

It also opts for Latin America, with a preference for Brazil and Colombia

MADRID, 15 (EUROPA PRESS)

Renta 4 Banco recommends investors to give more weight to the Ibex 35, whose target price it calculates at around 9,100 points in twelve months, which represents a potential of 10%, according to its forecasts for 2021, presented this Tuesday, which also The attractiveness of the Latin American Stock Exchanges stands out, with a predilection for Brazil and Colombia.

“We are overweight in Spain going into 2021, partly due to the strong exposure that many stocks have to Latin America. There are still risks from the pandemic, its health systems, the over-indebtedness of some economies and electoral appointments, but the support outweighs the risks “, said Natalia Aguirre, director of analysis and strategy at Renta 4 Banco.

Within the Spanish Stock Market, the firm recommends a “selective” approach, because it believes that there are stocks that are already overvalued. In its selection portfolios, Renta 4 stands out among its Ibex favorites BBVA, Cellnex, Grifols, Indra, Merlin Properties and Repsol.

In its portfolio of stocks of medium and small firms, its analysts opt for Applus, Árima, CAF, Dominion, Sonae and Tubacex. For their part, in the portfolio of best companies by dividends they have included Mapfre, Red Eléctrica, Faes, Repsol, Telefónica, Enagás, Ebro and Iberdrola.

Among all the firms they analyze, the greatest potential on the Iberian Peninsula is in the shares of the Portuguese Sonae, with an estimated 110% growth, so they recommend ‘overweight’. Among the Spanish companies, the greatest potentials are in Ezentis (70%), Tubacex (64%), Azkoyen (59%), Lar España (56%), Cellnex (53%) and Repsol (50%).

The bank maintains that equities are the asset with the best profitability-risk binomial in this situation, marked by interest rates at zero and the recovery in the form of ‘K’, that is, with “winners and losers” sectors. All investment assets, with the exception of shares, currently offer a lower return than their historical average, according to data analyzed by the entity.

In this context, the president of the Renta 4 group, Juan Carlos Ureta, has stressed that “we can no longer speak of an ‘asset allocation’ of fixed income and equities, but of liquidity and risk positions”. “I doubt that interest rates are going to remain close to zero in the next decade, but that is what the markets are discounting and the central banks say. Experience advises us not to go against the central banks,” he stressed.

BAGS ATTRACTION, DESPITE THE RISKS

The bank considers that equities are supported by an “attractive relative valuation” with respect to public debt and credit in a context of “financial repression”. He assures that the bags “are not expensive”, although they have “demanding” valuations, because he sees justification that the market is willing to pay higher multiples in this context.

In addition, he believes that the actions will benefit from the economic recovery and the profits of companies in 2021, hand in hand with effective vaccines against Covid-19, although this will be “heterogeneous by geographies and sectors.” The analysis underlines the “unconditional” support of central banks, which will continue their injection of liquidity, as well as fiscal policies with the completion of the European reconstruction fund.

Renta 4 also foresees that stocks will gain from the gradual resolution of political risks such as Brexit and US politics, and benefit from corporate movements arising from low rates and the need to grow inorganically to gain scale.

EUROPE AND LATIN AMERICA, BETTER THAN THE UNITED STATES

By region, Renta 4 Banco advises to overweight the Eurozone due to its greater cyclical component, the support of the European Central Bank and a superior recovery forecast for earnings per share. For the United States, its position is neutral, before demanding valuations and due to its political risk.

Their strategy on the stock market opts for taking a turn towards the ‘value’ due to the ‘gap’ that they detect with the ‘growth’ style, which is already “excessive”, but they do so “with caution”. That is, its position is 60% cyclical and 40% defensive, according to the head of institutional analysis, César Sánchez-Grande.

POTENTIAL OF HIGH YIELD BONDS

Regarding fixed income, the firm is betting on an overweight in ‘high yield’ (high yield bonds) which they see room for improvement compared to highs, with the more cyclical sectors lagging and giving more weight to corporate hybrid bonds of investment grade companies. Its positioning to investment grade bonds is neutral, although they are positive in the real estate, automobile, transport, financial and insurance sectors, with the subordinate segment in the latter.

In government bonds, its strategy follows a slight overweight in peripheral Europe, a neutral position in central Europe and an underweight in US bonds. As for the bonds linked to inflation, they would wait for corrections to enter to take positions.

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