Capital.com Research TeamItalian stock market remains an area of grave concern for investors due to the fragile economic conditions and political issues. The Italian economy is heavily weighed down by a hefty loan debt and uncertainty from recent political upheaval.
Italian Stock Market Outlook for 2019
The Italian stock market benchmark index, FTSE MIB, reached a two-year low on December 27, 2018. It was enough to stir up investors and cause a wave of pessimism. The showdown of the budget with the European Union added more fuel to the fire of investors’ concerns of a prolonged recession.
However, the Italian economy has started showing some signs of improvement around April 2019 drawing investors’ attention. The talks of the break-up of the coalition between the rightist League and Five Star Movement, and Fitch not downgrading its ratings for Italy were the positive aspects behind the bullish trend. Overall, the Italian stock market gained 20% since its big-time fall in December 2018.
To the dismay of investors, after the short-term bullish trend the Italian stock market looks gloomy again. Investors are most concerned about the political crisis in Italy, with Prime Minister Giuseppe Conte’s decision to resign. The Italian stocks are reacting negatively to these economic and political concerns, and the bullish trend has started to reverse.
Italian Stock Exchange
The Italian Stock Exchange, Borsa Italiana, is based in Milan and is the 108th largest exchange in the world. The Italian stock exchange was established in 1998. Since 2007, it has been a subsidiary of the London Stock Exchange. Borsa Italiana is regulated by the Ministry of Economy and Finance, through the agency CONSOB.
The Italian stock exchange operates through three major trading markets. The leading equity market is MTA, which caters to mid-sized and large-sized companies. MTA is further divided into two segments: STAR for mid-sized companies, and MTA International for the shares of non-Italian issuers.
Additionally, stocks of high-growth companies trade on AIM Italia, and MIV is the market for investment vehicles. The Italian stock exchange, Borsa Italiana, also has markets for derivatives, bonds, and ETFs.
The primary function of the Italian stock exchange is to manage the Italian stock market efficiently and judiciously. It works on an electronic trading system to manage both domestic and international brokers and members.
Benefits and Risks of Investing in Italy
The Italian stock market remains in an uncertain state. The country and its economy have been subjected to so many political and economic blows that the future has become highly unpredictable.
In light of a possible collision between Italy and other EU states and the risk of re-denomination, if Italy chooses to leave euro, investing in Italy subjects investors to more risks than benefits.
Equity prices are plummeting, short-term and long-term rates and yield spreads are spiking. The circumstances and market conditions do improve in phases; however, the Italian stock market still remains highly volatile and is subject to more volatility due to the upcoming general elections in the near future.
The major upside of investing in Italy is the strength and solidarity of its domestic companies. The local Italian companies are still viewed with interest and are known for the quality of their products. The products are mostly exported to other countries and, therefore, most of the leading companies may remain unaffected by the local red-tapism and fragility.
Elaborating an effective approach for investing in Italy, investors should carefully choose the markets to trade, considering highly volatile Italian shares. Top 5 most-traded Italian stocks at Capital.com include the following:
Most-traded Italian stocks | ||
#1 | a capital goods company, which owns 12 brands, including Case Construction, Iveco, Case IH, Steyr, FPT, Magirus, HeuliezBus and others. | |
#2 | an Italian-American corporation that designs, produces and sells world’s famous cars. The group's auto brands include: Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia, Ram, SRT and Maserati. | |
#3 | an Italian banking group, which delivers financial services to more than 250,000 clients and operates 45 branches in Italy | |
#4 | a famous Italian luxury goods brand with an extensive network of 660 mono-brand stores and a team of 4,000 people | |
#5 | an international pharmaceutical group, engaged in researching and producing a wide range of primary care pharmaceuticals and innovative orphan drugs. | |
FTSE MIB (Italy 40) Stock Market Index
FTSE MIB is the benchmark stock market index for the Italian stock exchange, Borsa Italiana. The index is made up of 40 Italian shares that are traded on the Italian exchange. The MIB 40 index measures the performance of the most liquid and capitalized Italian stocks and serves as a benchmark for the performance of the whole Italian stock market.
FTSE MIB index includes leading Italian automobile companies’ stocks like Fiat Chrysler Automobiles and Ferrari, banking corporations such as Ubi Banca, Unicredit and Banca Generali, media companies including MediaSet, and luxury fashion companies like Salvatore Ferragamo.
Trade Italy 40 - IT40 CFD
FTSE MIB is a floating index based on capitalisation weight. Its base value was set on October 31, 2003 at 10644 points. Now, the value of FTSE MIB keeps fluctuating based on economic, political, and other factors, and the performance of other stocks and players is measured relative to the performance of this major Italian stock market index.
Bottom Line
The Italian stock market is often perceived as trouble for money makers and investors are cautious of investing in Italy. The ever-increasing rate of unemployment, the weight of heavy loans, and substantial political uncertainty contribute to investors' wariness. However, there are still many attractive stocks, which may draw your attention. Follow the most popular Italian stocks at Capital.com and catch up the best opportunities to invest in Italy!
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