Consumer confidence in Italy has fallen to a six-year low, with last year's GDP growth of 0.4% the s...
Consumer confidence in Italy has fallen to a six-year low, with last year's GDP growth of 0.4% the slowest in almost a decade, according to Bloomberg.
With Germany mired in economic problems, Italian exporters have placed their hopes on the US being the sole driver of growth.
But a slowing economy in the US, which buys 10% of Italian exports, and the euro's 24% gain against the dollar in the past 12 months have so far put paid to that idea.
Investors now see an ongoing ECB relaxation of interest rates as perhaps the best hope for sustained stimulus. From the start of 2003 to the 5 March, Milan MIB 30 index total returns had fallen 8.49% in euro terms. This compared with a fall of 18.77% for the Dax, -13.58% for the S&P 500 and -10.38% for the FTSE 100.
SSSB equity analyst Roberto Casoni says Italy must also face up to special situation woes dragging back some of its biggest corporates.
Redundancies at some of the largest companies could soon move unemployment up for the first time in five years. Fiat, Italy's biggest industrial company, is speeding asset sales to head off collapse. Restructuring uncertainties saw Fiat shares lose 9.26% in the second half of February, Casoni notes.
But it is not all gloom at the Milan exchange. In the two-weeks to 21 February sample analysis of the MIB 30 taken by Casoni, the index outperformed all other major European indices.
Casoni says: 'This was mainly thanks to its composition. Defensive stocks such as Autostrade, ENI and Enel have a high weight in the index. The positive performance of these stocks, together with the resilience of telecommunication companies, led to a rise in the MIB 30.'
Casoni's research shows the MIB 30 being driven by financials and the struggle for control of the Generali insurance group.
'The reporting season has also brought positive surprises for most of the banks, with reported results better than those expected by the market,' he notes.
Casoni says SSSB remains positive on insurance stocks, predicting both short and long-term positive performance. 'But the driver is corporate action, not fundamentals,' he adds.
The Schroder International Selection Italian Equity A fund achieved a total return of -20.46% in the year to 3 March, according to Bloomberg performance data. Its five-year and year-to-date returns were 12.09% and -3.91% respectively.
Some 30.2% of its portfolio was in financials, where it was 1.9% underweight, 18.7% was in telecommunication services, an underweight of 1.6%, 12.3% was in energy, a 1.4% underweight, and 9.3% was in consumer discretionary, a 2.3% overweight.
Manager Adriaan de Mol van Otterloo also moved up to 10.2% industrials, a 4% overweight, and down to 2.9% utilities, a 7.5% underweight. He is now mostly invested in Autostrada Torino-Milano transportation stock, Italmobiliare Savings and SNIA materials equity.
Relaxation of ECB monetary policy.
Defensives enable MIB 30 outperformance.
Positive surprises in banks reporting season.
Also plan to scrap NI on contributions
Eight-week high against US dollar
Lower cost option for advisers
Following 2016 thematic review
December 2018 or early 2019