Bankia Surges from €1 to €1.60 as IBEX Fights for 10,000 Points

Bankia Rises from €1 to €1.60 as IBEX Battles for 10,000

In February 2014, Bankia surpassed €1.60 per share. The same entity that the state had rescued with public funds, which had traded around the €1 mark, experienced a rebound that proved wrong those who had written it off. The IBEX 35, meanwhile, clung to the 10,000-point level like someone holding onto a ledge: four consecutive monthly closes in the 9,900-9,920 range, with no one certain if it would hold for a fifth. Amidst this, a month of ups and downs unfolded, with cheap money seeking investment opportunities while the real economy showed no signs of life.

Bankia: From a Euro to €1.60 and the Trapped Short Seller

Bankia had been trading in several phases since around the €1 mark, with stops in the €1.35-€1.40 range, before touching €1.60 mid-month. For those who bought at the 2011 Public Subscription Offer, the figure remained a bad joke: a loss exceeding 95% compared to the initial price. For those who bought at the panic low, the outcome was different, and that was precisely the issue.

The prevailing interpretation was that the rules of the game had changed: the FROB (Fund for Orderly Bank Restructuring) had begun selling its stake, meaning the free float was no longer easily manipulated with large buy and sell orders. With more shares available in the market, there was less room for foul play. Under this premise, those holding short positions from €1.35-€1.40 found themselves squeezed, with some already discussing forced closures around the four-duro mark.

The detail of the weekly candle also did not favor the bears: volume concentrated at the end of sessions, and the stock had been rising for weeks against all odds. Once past €1.57, momentum seemed to take over.

10,000 Points: The Level Separating Rebound from Collapse

The index spent the month hovering around the 9,900-9,920 area. The round number of 10,000 became the battleground. For some, it was solid support; for others, a springboard before the abyss.

The most pessimistic scenario predicted that if the index failed to surpass 10,250 in two sessions, it would end up crashing to 9,300-9,400. The opposite scenario spoke of a rebound seeking 11,200 after breaking the previous ceiling. In between, the intermediate support of 10,055 was watched as the last line of defense before collapse.

Telefónica acted as a thermometer throughout the month. The operator fought for the €11.00 level with notable volume, and on the dip to that level, it absorbed twice the amount of stock as on previous days. For a stock with its weight in the index, this detail was significant: those who wanted to sell had already done so, and those buying were doing so with conviction.

Dividends, Debt Sold to a Vulture Fund, and Macro Data

In February, Banco Santander approved a complementary dividend of €1.50 per share. The news fueled the argument of those who believe investors should be paid while they wait, rather than relying on miraculous reinvestments. Companies that do not distribute dividends, by this logic, are inherently suspect.

On the other hand, Santander itself sold its exposure to Pescanova, approximately €70 million, to a British fund specializing in distressed debt. The operation removed the risk from the bank's balance sheet and transferred it to a third party buying the credit at a discount. For many, the signal was clear: when a bank sheds problematic assets to a vulture fund, the fishing company's problem is serious.

The month's key macro data came from Brussels. Eurozone confidence indicators for February surprised to the upside: business climate stood at 0.37 versus the expected 0.20; services sector sentiment was 3.2 against a forecast of 2.5; and industrial confidence was -3.4, better than the -4.0 predicted by analysts. With these figures on the table, some began to wonder if the stock market rebound had any substance or was merely a liquidity mirage.

The American Bubble vs. European Value

On Wall Street, the conversation was different. Michael Kors had appreciated x2 in two years and was already valued at $19 billion, leading more than one to point out that the US index carried an average overvaluation of 30% that would eventually be paid for. Miccionan reversion, they argued, would ruin many. The bet, in contrast, was on Europe.

The figures for Coach supported this argument: reasonable price, no debt, $1.1 billion in cash, and share buybacks without taking on debt. A classic profile of an undervalued stock, according to its defenders.

In the Spanish market, attention turned to Barón de Ley. The winery traded at prices reflecting its business but held €170 million in cash and fixed-income investments, including term deposits and Spanish and Irish debt, according to 2012 accounts. A considerable cushion that, for some, was prudence and, for others, a sign that the company couldn't find where to reinvest. The debate over whether a company with idle cash is an opportunity or a warning remained open, and the 2013 accounts had not yet been released.

One-Week Predictions: Perfect Score or Ridicule

There was no shortage of bets. An amateur analyst published a list of stocks that, in his opinion, would close the week in the red: ENG, FCC, GRF, IDR, and TRE. He admitted that none met all the criteria for initiating a short position, but attacking the trend in a bull market had its appeal. He acknowledged he would be satisfied with getting three right.

Conversely, another analyst countered stock by stock, using Fibonacci levels and strong-hand exits, in an exchange that lasted several days. The exercise had little to do with finance and much to do with competition. No real money was at stake—it was on paper, virtual entries—although fruta, according to one of them, was worth less than the time invested in calculating it.

Anomalous Auctions and Month-End Close

The month-end close produced unusual scenes. Telefónica concentrated 10 million shares in the final auction out of the 17 million traded throughout the day, closing at €11.11. Abengoa jumped from 4.11 to 4.216; BME, from 30.11 to 30.21. Several sell orders were bypassed by these last-minute movements.

The phenomenon sparked the usual suspicions: end-of-day manipulation, sweeps to take out stops, and position adjustments before the new month. Those who had defended market transparency had an uncomfortable day. Those who had argued for years that auctions are hunting grounds had another day to add to their list.

The Financial Press Under Scrutiny

One of the most repeated reflections of the month had little to do with the stock market and much to do with how it's reported. The idea: reading the financial pages has the same effect as reading a sports newspaper. Sensationalism, opportunism, and headlines that align with the day's trend. It's not an original thesis, but it summarizes well the mood of those who have been trading for years and see the narrative change each morning based on the previous day's close.

In this context, the sponsored article about Bankia published in Actualidad Económica did not help. The piece presented the management of the bailed-out entity as a success story, and many read it with a raised eyebrow. When the official narrative and the numbers of the shareholder who lost 95% do not align, distrust is not an opinion: it's arithmetic.

A Close That Closes Nothing

The month's balance sheet presents a contradictory picture. Bankia rising, the IBEX stagnant, the Eurozone improving, and Wall Street carrying an excess of 30%. Cheap liquidity from central banks pushed funds towards equities because nothing else offered any return. That is probably the only consensus of the month.

The Spanish index closed February in the 9,900-10,000 range, neither breaking the ceiling nor losing the floor. Bankia finished above €1.50 with a weekly candle that bears did not want to look at. And the question remained, as always: was the rebound due to the real economy or just the tide of cheap money that, one day, would stop rising?