IT40 forecast: Italy’s top stock index bounces after positive Q3 economic data

The value of the Italy 40 (IT40) index, also known as the FTSE MIB, has dropped by 11.2% since the year started as European countries have been struggling to withstand the energy crisis prompted by the ongoing war between Russia and Ukraine.  

The IT40 is underperforming some of its most relevant regional peers. Italy’s finances are not in great shape to face the long list of macroeconomic headwinds affecting the global economy.

In this IT40 forecast, we assess the index’s historical price trend and its prospects to outline plausible scenarios for the future.

What is the IT40 Index?

The IT40 was created by the FTSE Russell company, a subsidiary of the London Stock Exchange Group (LSE). Its components are the stocks of the 40 largest companies by market capitalisation that trade on Italian exchanges.

As of 12 December, according to data from MarketScreener, Enel held the highest weight on the index, making up 10.1% of its price. The index’s top 10 holdings accounted for 66.8% of its price and performance, meaning that this is a heavily concentrated equity-focused benchmark.

These are the 10 top holdings that make up the FTSE MIB index as of 12 December:

According to data from iShares, a subsidiary of Blackrock that manages an exchange-traded fund (ETF) that mimics the performance of this European stock index, the financial sector had the largest weight on the index with 30.8%, followed by utilities (18.5%) and consumer discretionary (17.3%).

So far this year, the worst-performing sector has been healthcare with a 29.7% loss, followed by consumer non-cyclicals, as equities in this sector shed 22.6% of their combined value. 

The only sector that has performed positively this year is energy with a 16.8% gain.

The best performing sub-sector is transport infrastructure with yearly gains of 31.7%, followed by oil & gas – equities in this segment recorded a 24.4% advance during the year. The worst performing sub-sector is professional & commercial services with a 44.7% year-to-date (YTD) loss.

Tenaris is leading this year’s winners on the FTSE MIB index with accumulated gains of 67.1%, followed by Atlantia (31.7%) and Leonardo (21.1%).

Leading the list of this year’s losers is Saipem (down 98.9%), followed by Telecom Italia (-53.1%) and Nexi (-44.7%).

Since the top five holdings account for more than 40% of its value and performance, investors can focus on analysing the current situation and prospects of these five companies to draft a plausible IT40 forecast.

IT40 predictions: Technical views

Europe’s energy crisis, Italy’s elevated budget deficit as a percentage of its gross domestic product (GDP), and a chance that a recession could be about to hit the global economy are some of the factors that have depressed the value of equities in the country.

The Italian FTSE MIB index has accumulated losses of 11.2% this year, making it the worst-performing broad-market benchmark in the region compared to other prominent peers, such as the UK’s FTSE 100 index (UK100) and the Spanish IBEX 35 index (SP35).

However, stocks on the IT40 index bounced off a multi-year low of 20,200 recently. The daily price action seems to have formed a double-bottom pattern.

Double bottoms are typically considered bullish and a positive short-term outlook was confirmed after the 23,250 resistance – now turned to support – was broken in the first few days of November.

This jump may have been prompted by positive economic data from the third quarter as the country’s economy grew by 0.5%, while estimates were expecting either a negative or slightly less positive figure.

In addition, oil prices have been declining lately. This favours a less gloomy outlook for the Italian economy and may have contributed to improving the market’s baseline IT40 predictions.

Moving forward, the 23,250 level is a key area of support to watch now that the index’s rally appears to be taking a breather, while the 25,000 level is a key resistance to break for bulls.

Key drivers to consider to draft an IT40 Forecast

Italy is a member of the EU, therefore, its finances and economic performance are closely tied to that of the economic bloc. The country’s GDP is expected to advance by 3.8% this year, but growth could decelerate dramatically next year as Italy’s economy is expected to expand by just 0.3% in 2023 and 1.1% in 2024.

Forecasts from the European Commission (EC) indicate that inflation in the country could end the year at 8.7% and 6.6% a year after. High energy and food prices have been primarily responsible for this escalation in prices in the economic bloc, largely due to the hostilities between Russia and Ukraine.

That war is a key variable to watch to draft an Italy 40 forecast. If the conflict escalates to the point that nations within the region are forced to participate , the value of equities within the economic bloc – including Italy – could experience a sharp drop.

The state of the energy market could also have a strong influence on the performance of the IT40 index. Any indications that natural gas and oil prices could continue to increase in the future may lead to revisions to the country’s forecasted economic growth that could depress the value of companies that are based in this European country.

Finally, Italy’s finances are not in great shape either. In this regard, the monetary policy of major central banks across the globe is expected to keep tightening, and that could make it more difficult and more expensive for the country to refinance its debt.

If the credit market dries up and market participants become even more risk-averse amid an escalation in geopolitical tensions and other similar factors, Italy’s finances could deteriorate further. This could also hurt the value of equities in the country and hit economic performance.

IT40 forecast: Algorithm-based predictions

Wallet Investor provides forecasts for IT40 futures, which can be used to estimate where the value of the index may go in the following days, weeks, months and years.

As of 12 December, the algorithm held a neutral-to-bearish short-term outlook on the IT40 index. The price is expected to drop by 2.8% within the next 14 days to 23,560.

However, WI predicted that the value of the index could rise in the next few years. The following are the algorithm’s forecasts for the end of December 2023 and November 2025. There was no IT40 forecast for 2030 available.

IT40 forecast 2023: 25,718.

IT40 forecast 2025: 28,036.

On the other hand, the baseline short-term forecast from Gov Capital is neutral. The algorithm is predicting that the price will trade near the 24,400 level within the next 14 days, based on an analysis of the index’s historical trend.

Meanwhile, the mid-term outlook is positive as the index is expected to climb to 41,567 a year from now, implying a 72% gain. The following are IT40 predictions.

IT40 forecast 2023: 42,086.

IT40 forecast 2025: 95,781.

None of these IT40 forecasts or the opinions and comments expressed in this article should be taken as a recommendation to invest in the index. Investors are encouraged to perform their own due diligence before making any investment decision. Past performance is not a guarantee of future results.

FAQs 

Markets in this article

Gm
Generali
22.82 USD

-0.23 -1.000%

ENEL
Enel
6.065 USD

-0.025 -0.410%

ENI
Eni
15.30 USD

0.04 +0.260%

STLAM
Stellantis
23.06 USD

-0.23 -0.990%

UK100
UK 100
8083.2 USD

74.9 +0.940%

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