LONDON: Italian stocks continue to trade at a deep discount to global peers, even after surging this year, reflecting nagging concerns about fiscal credibility and weak long-term growth prospects.
Italian shares are up around 40% so far this year, their highest level since 2008, reflecting strong gains by banks and defence firms and improved sentiment towards Europe.
The market is not as cheap as it was, trading at a discount of roughly 34% compared to global stocks. It touched its widest discount in 35 years of around 50% in 2023, LSEG data and Reuters calculations showed.
But it’s far from levels seen during the 2020 Covid crisis when the discount was just 13%. In contrast, shares in France, where the government is close to collapse, offer a 19% discount to global peers.
“Italian assets are too cheap because people are still concerned about structural imbalances in the Italian economy and the lack of structural reforms,” said Emmanuel Cau, head of European equity strategy at Barclays.
The message from Italian equity investors contrasts with a more upbeat view from bond markets, where the premium investors demand to hold Italian 10-year bonds over top-rated Germany has fallen to its lowest since 2010.
It’s trading below 100 basis points (bps), having briefly spiked over 300 bps in 2020. — Reuters
