Plunging stock market and skyrocketing spreads. This is the summary of what has happened in recent months on the Italian market due to the political uncertainty that is dominating our country. If the fortunes of a government were to be measured solely and exclusively on the basis of the judgment of investors, we could already say that the desired success has not arrived for the Lega-M5S executive in these first few months at Palazzo Chigi.
The percentages, on the other hand, are merciless. From the day of the inauguration of the new government Piazza Affari recorded double-digit losses while the gap between Italian and German ten-year bonds has more than doubled, a sign of how trust in Italy at national and international level has decreased day after day.
La David Hume Foundation he calculated how much the political-financial uncertainty that arose after March 4 has cost us (virtually speaking, of course). Well, taking into account the change in the capitalization of the Italian stock market (limited to listed companies), the change in the value of government bonds held by individuals and operators resident in Italy (net of those held by the Bank of Italy) and the depreciation of debt securities on the Italian bond market from 28 February to 19 October 198 billion have been burned (over 10% of GDP) of which 107 only since the government took office.
ELECTIONS AND THE GOVERNMENT SLOW THE MARKET SQUARE
Taking into consideration only the performance of the FTSE MIB since 28 February, and therefore from the week preceding the elections of 4 March, the main index of Piazza Affari lost 16,1% of its value. From 31 May, the day of the Executive settlement, to today the decrease amounts to 12,94%. In less than 5 months therefore, the Stock Exchange has almost reset the earnings of 2017, the year in which Milan conquered the first step of the podium among the EU lists, rising by 13,6%.
To better understand how "heavy" the decline was, the figures provided by the Davide Hume Foundation are also useful, according to which from 28 February to 19 October the market value of the Milan Stock Exchange decreased by a good 67,6 billion euros which become 54 from 31 May.
To pay the greatest price for this trend were bank stocks which in just six months burned a total of 35,8% of their value. To suffer the highest losses were Banco Bpm (-46,1%) and Mps (-45,1%), followed by the two big names in the sector: -37,8% for Unicredit, -37,1% for Intesa Sanpaolo .
BONDS AND GOVERNMENT SECURITIES: THE ITALY RISK SURPASSES
The picture does not improve if we analyze the trends of bonds and government bonds. Also in this case, it is possible to use two reference time horizons. According to calculations by the David Hume Foundation, from 28 February to 19 October debt securities on the Italian bond market depreciated by 41,9 billion, while government securities held by individuals and operators resident in Italy (net of those held by the Bank of Italy) lost 88,5 billion. The downward trend is also confirmed by the day the Lega-M5 government takes office. From May 31 to today both the markets lost 17,2 and 35,6 billion euros respectively.
Mirror of the data just provided is the trend of the spread, with the gap between the Italian 8-year bond and the German equivalent more than doubling in just 28 months. On February 131, the differential between the BTP and the Bund stood at 253 basis points. With the post-election uncertainty, the spread gradually widened to reach 31 basis points on the day of the formation of the government led by Giuseppe Conte (May XNUMX). To make the situation worse they then arrived the controversy over the move with the tug-of-war between Italy and the EU and the probable rejection by Brussels due to the non-compliance with the European Stability Pact. The result is that on October 22nd, the spread reached 302 (after having reached a maximum of 324 on October 18th), with an increase since February 28th which in percentage terms exceeds 130%.
STOCK EXCHANGE, BOND AND GOVERNMENT BONDS: HERE'S WHAT WE BURNT
As mentioned, bringing together the three markets from the pre-election period to 19 October, 198 billion euros were burned. The figure, explains the David Hume Foundation, does not take into account the government bonds held by Bank of Italy and by foreign investors. By including these two parameters in the calculation, in fact, overall losses skyrocket to 304,7 billion euro.
"The calculated losses are obviously virtual, and could be reabsorbed, or turned into gains, should the economic situation and market valuations evolve positively in the coming months or years", underlines the Foundation.
