The IBEX 35 Index: Expert Analysis & Investment Opportunities

Instrument description

In Europe, one of the popular index markets is the Ibex 35 that lists 35 of the largest companies that actively trade in the Madrid Stock Exchange, which is the most valued stock exchange in Spain due to market capitalization. In the local Spanish language, the Madrid Stock Exchange is called Bolsa de Madrid. The Ibex 35 was launched in 1992 and is Spain’s benchmark index and tracks 35 companies with the most liquid shares in the stock market.

The Ibex 35 is a growing stock market index and allows traders and investors to gain access to the broad exposure of shares to Spanish listed companies. The Ibex 35 is quite a volatile market that appeals to short term traders who can speculate the price movements and have a chance to potentially profit.

History of Ibex 35 Index

The Ibex 35 represents 35 of the most prominent companies that are listed and traded actively on the Madrid Stock Exchange called Bolsa de Madrid in Spanish. Jose Bonaparte tried to introduce the first stock exchange in Spain in 1809 but could not succeed as Madrid was not a business hub at that time. However, the Madrid Stock Exchange was made in 1831 that included stocks of banks, iron and steel companies, and railways.

The Madrid Stock Exchange kept functioning during World War One but was closed during the Civil War in Spain from 1936 to 1940. The Madrid Stock Exchange was changed in 1988 due to incorporation with the European Monetary System. By 1999, nearly all stock market exchanges in Spain started trading in Euros including the Madrid Stock Exchange.

The Ibex 35 was formed on January 14, 1992, and performed tremendously well from 2000 to 2007 as compared to other index markets in Europe. The Ibex 35 has a base value of 3000. The economic growth allowed the Ibex 35 to maintain its performance, but the economic crisis of 2008 affected every major financial market in Europe, including the Ibex 35 that saw its biggest decline.

The Ibex 35 is the standard index market that demonstrates the economic health of Spain, and it is maintained by Sociedad de Bolsas that also oversees every other stock and commodity market in Spain. The Ibex 35 constitutes the largest companies in Spain that operate in different sectors of the market, such as finance, real estate, consumer goods, oil, and energy. Some of the famous companies in Ibex 35 include Aena, Bankinter, Amadeus IT Group, IAG, BBVA, CaixaBank, Iberdrola, Endesa, Banco Santander, Repsol, and Inditex.

The Ibex 35 is reviewed twice every year by the Bolsas y Mercados Espanoles (BME) that includes members from the Stock Exchanges and Derivative market and professionals from the financial and academic field. The best ’35’ companies are selected based on their market capitalizations and the largest trading volume valued in Euros for the previous 6 months. Once the criteria of liquidity are approved, and the index has been measured. The committee will analyze other factors and then issue the list of companies that make it into the Ibex 35 Index. The company must have an average market cap of at least 0.3% of the total market capitalization of the index.

The IBEX 35 Index reached an all-time high of 15, 945.70 in November 2007, and the lowest recorded value was 1, 873.58 in October 1992.

How the value of Ibex 35 is calculated

Ibex 35 Index is a market capitalization-weighted like most index markets in the world, such as DAX 35 and ASX 200 index. As Ibex 35 is a market capitalization-weighted, which means the value of the index is measured by multiplying the share price of the companies with outstanding shares.

The market capitalization of Ibex 35 is estimated close to €1 Trillion. Ibex 35 Index is a market-cap index, which denotes that larger companies have a higher percentage of weightage and more influence on the value of the index, and smaller companies have lower percentage weights and lower impact.

How to read the price change in Ibex 35

The traders and investors both follow the Ibex 35 Index is due to consistent swings in day to day trading along with wide exposure to liquidity and volatility. The Ibex 35 is known for its large volume of trading and allows day traders to gain from the short term price fluctuations.

Once we examine the Ibex 35 Index chart, we notice the Index trades in a stable way and from the range of 8400.00 to 10000.00 points from July 2019 to mid-February 2020. The Ibex 35 Index reached the highest value of 10108.84 on February 19, 2020. There is a sudden Bearish trend from the last week of February, and the Ibex 35 Index reached the lowest value of 6077.28 on March 16, 2020. Since March, the Ibex 35 Index is still struggling to gain momentum and trades at 7608.60 EUR. The Bid price is 7605.4, while the Ask price is 7595.5.

How to trade in Ibex 35

You can trade in IBEX 35 Index through exchange-traded funds (ETFs) or by using derivative instruments such as options, spread bets, and Contract for Difference (CFDs). The 35 companies of the Ibex 35 Index are also listed on the Madrid Stock Exchange. The trading hours of the Ibex 35 Index are Monday to Friday from 09:00 to 17.35 (GMT+ 1 Hour). The Ibex 35 offers tight spreads, long trading hours, and the ability to trade highly liquid stocks.

The popular trend of trading in the Ibex 35 Index is by using CFDs, which allows you to use leverage and speculate on the price movements of the underlying asset. You have the means to trade a relatively larger trading position by depositing just a small amount in your account. CFDs allow you to maximize your gains by correctly predicting the value of the index, but there is also a chance of equal losses, so a risk management tool such as stop losses may be applied to limit further losses.

With CFDs, you can benefit from both Bullish and Bearish trend. For example, if you think the value of the Ibex 35 Index will show a Bullish trend, you will go Long (Buy), and conversely, if you think the value of the Ibex 35 Index will show a Bearish trend, then you will go short (Sell).

What causes the price change of Ibex 35?

The value of the Ibex 35 is determined by many economic factors that also influence the overall economy of Spain. Both the micro and macro-economic factors, along with the individual performance of the companies helps to determine the value of the Ibex 35 Index. If the economic conditions of Spain are stable and good, then the Ibex 35 will show a high value.

The domestic financial situation, trade agreements, changes in industry-related taxation and legislation, and drastic fluctuation in the share price of one or a dozen companies. As Ibex 35 consists of many financial institutions, Forex trading has a significant impact on the index as opposed to other global indices.

The international news and events seem to negatively affect the Ibex 35, and any major event or crisis makes the Ibex 35 loose significant points. The events such as Brexit (UK exit from EU), Grexit (Greece exit from EU), and EU policies impact the Ibex 35 Index. However, online traders can regularly monitor the situation and can try to take advantage of the instability in the Ibex 35 index and have the possibility to potentially profit. Many of the companies in the Ibex 35 are from a specific industry, and monitoring the performance of these companies can also give a fair idea on when to trade in the Ibex 35 Index.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.