And now everyone wants Business Square. accomplice theDragons effect and the signs of recovery in the USA are back investors' purchases on the Milan stock exchange. In the last month the recovery is 14,51%. And for many experts it is here to stay. On the contrary. The Ftse Mib might even surprise you. A sign that sentiment has changed and that many are betting on the recovery of the Milan Stock Exchange is the rally of leveraged ETFs on the Ftse Mib. In the last month, the RBS Leveraged Ftse Mib Monthly rose by 31,34% and is up today by 3,65%: the ETF replicates twice the performance of the Ftse Mib on a monthly basis. Or of the Etfx Ftse Mib Leveraged (2x) fund which replicates on a daily basis double the performance of the Ftse Mib index of Milan: +30,17% in the last month and today it is up by 3,55%.
LESS RISK AND ATTRACTIVE VALUATIONS, INTERNATIONAL INVESTORS ARE BACK
Stefano Andreani, equity manager of Crédit Suisse, “the change of government and the intervention of the ECB through the Ltro (the refinancing without limits at 36 months at 1%, ed.) have clearly changed the scenario”. And so many of the risks that worried international investors disappear, starting with the refinancing of maturing bonds for banks in 2012 and 2013. “We see the first upgrades on bank profits due to the carry trade and the repricing of loans, a fundamental element for a structural improvement in profitability that should not be underestimated – explains Andreani -. What is still difficult to assess today is the impact of the fiscal maneuver on growth, which could weigh on the cost of credit and therefore again on profits. On this front, however, it must be considered that a recessionary phase is in any case foreseen by the market and recent developments at a macroeconomic level signal a phase of recovery at a global level which will also have an effect on the domestic economy”.
After the recent government manoeuvre, the risk associated with regulatory changes has also decreased. Which adds up to low listing ratings. “Which are also extremely attractive for value investors, as well as for strategies of inorganic growth by foreign companies - Andreani points out - The positioning of investors who are still very unloaded on Italian securities and increasingly "nervous" should not be underestimated given the very good performance the domestic market is offering. There is still a lot of room for normalization on this front”.
Dice Marco Scherer, manager of Dws (Deutsche Bank): “In the coming months, the list will above all be influenced by the support for Italian debt to the government bond market both by the Ltro program and by the consolidation of the public finances. A further decline in Italian sovereign bond yields will support the positive trend on the equity market. International interest in the Italian stock market will then be stimulated by further improvements in the restructuring of Italy's economic conditions (such as the labor market, privatizations and the reduction of bureaucracy)”.
THE RECOVERY IS LED BY THE BANKS, THE BTP COMPETE WITH THE LIST
“There has been a return of interest on the stock markets – he also confirms Massimo Cavalli, head of the equity market of Allianz Global Investors – in the event of Greece's default, we do not expect a new collapse but we need to understand how the situation and then also the Portugal question will be dealt with. The recovery will be led by banks but also by industrial stocks with strong exposure to international markets, such as the USA, Asia and Australia, aided by the weakening of the euro, excluding, however, companies exposed to discretionary consumption. After the recent recovery, we believe there is still some room for appreciation for the banks”. But it is good not to get caught up in the generalized enthusiasm for all bank stocks. “When there are recovery movements, all the securities are rewarded without making any distinctions – says Cavalli – the banks should benefit from the easing of the spread but the sector will be affected by the European sector where capital increases are necessary and in this economic scenario the provisions on credits will grow again”. Yes, because Italy's economic trend should also be kept in mind, which for many will lead to a recession of around -1%. And we will have to understand with what intensity it will occur.
It also detects Mario Spreafico of Schroders: “It is clear that with everything that has happened we will find ourselves in a recession and that the industrialists have paid for it. Today we have a situation opposite to the 2008/2009 crisis: then the priority was the safeguarding of the banking system and the real economy, there was no State risk. Today the priority is the preservation of the States, then the banks and therefore, unfortunately, the real economy suffers”. Also because the limited choice in the industrial sector of our list does not help to make inroads with international investors. “The perception of the international markets – says Spreafico – is to see the Eurozone as a block: when the equity market is increased, those markets considered more liquid and less exposed, such as Germany and France, are favoured. But that eventually becomes an anomaly because we now have very expensive German industrial stocks.” The unexpected speed of recovery of the BTPs and the awareness that it was exaggerated is bringing the market back towards equilibrium levels, with the recovery led by the banks, but will the purchases also return to the rest of the list? “In Italy – says Spreafico – what can compete with the stock market, excluding the banks, is the debt market which still offers attractive returns. Utilities, for example, have always been bought for their dividends but now they have competition from BTPs”.
