The first thing you should know is that the IBEX 35 is a stock market index that tracks the performance of the 35 most liquid shares listed on the four Spanish stock markets (Madrid, Barcelona, Bilbao and Valencia).
It began to be published on January 14, 1992 and since then more than one hundred publicly traded companies have formed part of the composition of the Ibex 35.
As a curious fact about the most important stock market index in Spainonly six companies that made up the original index are still in it: Telefónica, Iberdrola, Endesa, Repsol, BBVA and Santander.
What is the Ibex 35 and how does it work?
In short, the Ibex 35 is a price index weighted by market capitalization.
What does this mean? Market capitalization is the value of all the shares of a company listed on the stock exchange and is calculated by multiplying the number of shares outstanding by the market price at any given time.
Since the Ibex 35 is a stock market index weighted by market capitalization, the shares with the largest capitalization will have a greater weight or importance in this index and, therefore, they will have a greater influence on the upward or downward movements of this indicator.
How companies are selected for the stock index
As stated at the beginning, this index is made up of the 35 most liquid stocks in the Spanish stock market.
The selection of these titles corresponds to the Ibex 35 Advisory Committeewhich meets every six months (January 1 and July 1), to assess whether or not the composition of this index is modified.
It is common to assume that the stock market indices that are benchmarks for a country’s economy are made up of the shares of the largest companies.
This is not always so.
In the case of the Ibex 35, even though a minimum capitalization is required to be eligible to integrate this index, the selection of a share does not directly depend on the size of the company, but on the liquidity of their titles.
The selection of a share to integrate the Ibex 35, has nothing to do with the economic sector to which it belongs, but exclusively with its liquidity.
The criteria used by the committee to include or exclude a share in the composition of the Ibex 35 are the following:
- Mid-Cap: The average capitalization of the share must be above 0.3% of the average capitalization of the Ibex 35, during the last six months prior to the committee meeting.
- Negotiation: Once the capitalization requirement is met, the stock must have been traded in at least 1/3 of the sessions that took place during the six months prior to the committee meeting.
- Largest Cap Stocks: If the share does not meet the trading requirement, it can still be listed on the Ibex 35, if the share is ranked within the top 20 in terms of capitalization.
Companies that make up this Spanish index
This Spanish stock market index is made up of the first 35 companies with the greatest liquidity in the Spanish stock market.
These companies belong to various economic sectors such as industrial, telecommunications, financial, health, mass consumption and energy.
Below, we present a ranking of the first 20 companies that make up the Ibex 35, in terms of their market capitalization, with figures from the end of December 2021.
In December 2021, Inditex leads the ranking of Ibex 35 component companies, by market capitalization, with a capitalization of 87,860 million euros, followed by Iberdrola SA with 65,630 million euros and Banco Santander SA with 57,560 million euros.
Among the first five companies in the ranking they accumulate more than half (51%) of the total market capitalization of the first 20 companies of the Ibex 35.
|Ranking of the first 20 companies of the Ibex 35|
|By Market Capitalization|
|In millions of euros|
|Textile Design Industry SA (INDITEX)||87,860|
|Santander Bank S.A.||57,560|
|Banco Bilbao Vizcaya Argentaria SA||39,970|
|Cellnex Telecom SA||34,360|
|Naturgy Energy Group SA||27,960|
|Amadeus IT Group SA||26,600|
|Aena SME SA||20,900|
|Siemens Gamesa Renewable Energy SA||14,000|
|Red Electrica Corporation SA||10,290|
In conclusion, understanding this stock index and identifying its operation is essential for those who are immersed in the stock market.
Although it is an area that can be complex, being constantly updated is the basis of any movement or decision that is made in this regard.
Continue reading: 10 Profitable Franchises in Spain to invest in 2023