Italy’s blue-chip stock index is on a roll, having risen by 18% in the past two years.
Defying official projections of zero economic growth this year, 0.5% growth next year and an expansion of 0.6% in 2024, the heavily domestic FTSE MIB index is enjoying a buoyant 2019.
Currently trading at 22,403.50, it stood at 21,899.88 a month ago, on 23rd September, and 21,896.84 six months ago, on 23rd April.
Years of slow growth
One year ago, it stood at 18,966.22 on 22 October.
The FTSE MIB contains the 40 most traded stocks on Borsa Italiana, the Italian stock exchange. A glance through its constituents discloses some of the great names of Italian business and industry.
From the automotive world are Fiat Chrysler and Ferrari, while the energy sector is represented by gas group Enel and Italgas. Flying the flag for financial services are Banco BPM, Banca Monte dei Paschi di Siena, Unicredit and insurer Assicurazioni Generali.
Defence and aerospace group Leonardo, formerly Finmeccanica, is included, as is Telecom Italia. And those fond of a taste of the sunshine with their cocktails may be pleased to see that Campari is a constituent.
Trade Telecom Italia SPA - TIT CFD
Despite a long-standing reputation for political volatility and high levels of public debt, Italy has Europe’s second-largest manufacturing economy, after Germany. Its private sector is renowned for stylish and desirable products, from sports cars to handbags, and it is a member of the Group of Seven advanced economies, as well as being a founder member of the European Union.
Since joining the euro in the “first wave” in 1999, Italy’s economy has barely grown. According to the International Monetary Fund (IMF), average annual expansion from 2001 to 2010 was just 0.3%, against 0.9% for Germany and 1.3% for France.
The euro-zone average was 1.2% and the UK, which is not in the euro, grew by an average 1.6%.
“Significant challenges remain”
For Italy, euro membership removed the safety valves of inflation and devaluation that had been available in the past. But the country remained reluctant fully to embrace the rigours deemed essential by the Brussels authorities to making a success of joining the single currency, such as reforms to labour and product markets and a firm grip on public spending and debt.
In its most recent Article IV health check for the Italian economy, the IMF noted: “The Italian economy has been recovering modestly from the global financial and euro area sovereign debt crises. Employment and labour force participation have risen, unemployment has fallen, and banks’ non-performing loans have declined.
“Nevertheless, significant challenges remain. Real incomes per capita are still near the level of two decades ago and have fallen steadily behind euro area peers, poverty rates are elevated, and public debt is very high.”
The strong stock-market performance will have been supported, in part, by the “quantitative easing” programme of the European Central Bank, which pumps cash into the economy, which in turn, tends to inflate asset prices. The ECB’s outgoing president Mario Draghi is a native of Rome and a former governor of the Bank of Italy, the central bank.