“The good news for the past two months or so ... is that the market is clearly discriminating more with regards to understanding country-specific developments than (it was) last year,” said Valentijn van Nieuwenhuijzen, head of strategy at ING Investment Management, The Hague, Netherlands. “It's no longer the case that these peripheral markets are moving in the same direction.” Since the beginning of 2011, ING has increased investments in Spain across a variety of asset classes. He wouldn't say how much the firm has invested in Spain.
While other countries seeking bailouts have had both high budget deficits and high debt-to-GDP ratios, a key difference with Spain is its much less burdensome debt load, said Nick Gartside, managing director and international chief investment officer for fixed income at J.P. Morgan Asset Management, London. “When you've got both (deficit and debt problems), it's very difficult to see how you get out of it,” Mr. Gartside said. “But when you have just one, there is a way forward.”
“We're very comfortable with” investing in Spain, he added. Mr. Gartside's Strategic Bond fund has bought about $13 million in Spanish corporate bonds since Jan. 1.
Stuart Mitchell, founder of European equity long/short manager S.W. Mitchell Capital LLP, London, said his firm bought Spanish equities this year for the first time in years.
“They've rebounded very strongly,” he said. The sovereign debt crisis “had a pretty serious knock-on effect to (share prices) in Spain,” which created bargains.
The firm bought stocks of Banco Santander SA, which looks to Spain for less than a third of its overall business, as well as airline booking technology company Amadeus IT Group SA. S.W. Mitchell Capital has bought €75 million ($108 million) in Spanish stocks this year.
Because of the size of its economy, Spain has been a major concern of managers since at least November. But recent fiscal and structural reforms, such as those to pensions and the banking sector, have drawn plaudits from the International Monetary Fund and the Organization for Economic Cooperation and Development.
And despite reforms and belt-tightening, Spain's economy has continued to grow so far in 2011. “You've also continually seen a lot of successful issuance,” both from the government and from banks, noted Aberdeen's Mr. Dryer. “At some point this becomes self-fulfilling.”
But managers still warn that Spain — and the European sovereign debt crisis in general — is far from being in the clear. “We might look back at this as a turning point, but we'll see more volatility from here,” Mr. Dryer said. Aberdeen has increased fixed-income investments in Spain, but he said that “it's a pretty tactical market,” adding that his firm still prefers Italy over Spain.