Bargains to be found amongst Spanish stock rout

* Bellwether stocks oversold-analysts

* Some wrongly seen as proxy for Spain-analysts

By Sonya Dowsett

MADRID, Feb 12 (BestGrowthStock) – Spanish blue-chip stocks have
been indiscriminately punished on fears about the country’s
fiscal health, investors and analysts say, leaving opportunities
for bargain hunters.

The country’s blue-chip index (.IBEX: ) has fallen 14 percent
since the start of the year as investors fret about Spain’s
ability to fund its huge budget deficit, dragging bellwethers
like Santander (SAN.MC: ) and Telefonica (TEF.MC: ) along with it.

Telefonica shares have shed around 16 percent of their value
since the beginning of the year and this has been seen as a
buying opportunity by Mark Bon, fund manager at Royal Canada who
manages around 500 million pounds ($785 million) in assets.

“That looked oversold,” said Bon, who bought Telefonica
shares following last week’s rout. “It looks good value compared
to its European telecom counterparts. It’s still got solid
franchising in Latin America.”

Andrea Williams at Royal London Asset Management agreed that
Telefonica did not deserve to be used as a proxy trade for
Spain.

Telefonica, around a third of whose revenues come from
Spain, is currently trading at 9.82 times 2010 earnings, against
a European sector average of 10.43, according to Reuters data.

Another Spanish blue-chip with a relatively low exposure to
its domestic market is the eurozone’s biggest bank, Santander,
down 18 percent since the beginning of the year.

Investors say the bank, for which Spain accounts for just
around one third of profits and loans, has been oversold on
fears Spain’s sovereign rating could be downgraded and point to
its strong 2009 results reported last week.

“Beyond the current overly negative market sentiment, the
impact from a sovereign rating downgrade would be marginal,”
said Arturo de Frias Marques, analyst at Evolution Securities.
“Sovereign risk has been grossly exaggerated.”

Santander is trading at 8.8 times 2010 earnings, against
20.22 times for Britain’s HSBC (HSBA.L: ), according to Reuters
data.

Ferrovial (FER1.MC: ), the infrastructure giant which bought
British airports group BAA, has taken a similar tumble of around
18 percent since the beginning of the year.

“We believe the …decline in Ferrovial’s share price over
the last month is unjustified and consider investors are
mis-perceiving the group’s activities and debts as focused in
Spain,” said Robert Crimes, analyst at Credit Suisse.

Around a quarter of core earnings come from Spain and around
80 percent of its groaning debt pile is non-euro denominated,
further reducing its exposure to sovereign woes.

However, one fund manager said its 22 billion euro ($30.08
billion) debt pile was reason enough to avoid the stock.

“It’s got so much debt associated with it that in an
environment where interest rates start moving upwards they’re
going to feel the pinch,” said Schroders fund manager Andrew
Lynch, who manages around 2 billion euros in assets.

“I would start looking at the companies that do not have
particularly geared balance sheets as places to find things that
have been overly punished,” he said, mentioning companies such
as cash-rich, debt-free retailer Inditex (ITX.MC: ).

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Bargains to be found amongst Spanish stock rout