Italian equity ETFs are the “best-looking in the European ugly parade”

Jun 11th, 2012 | By | Category: Equities

Vince Stanzione, a vocal private investor and contributor to Growth Company Investor, says that investing in his homeland Italian stock market offers investors an excellent bet.

Italian equity ETFs are the “best-looking in the European ugly parade”

Italian equity ETFs are the “best-looking in the European ugly parade”, says Vince Stanzione, a vocal private investor known for his contrarian views.

Stanzione, who is known for outlandish and contrarian views, comments: “Many [investors] group Italy with Spain and Greece, yet Italy is in far better financial shape and never had a large property or consumer boom like its southern European neighbours. Italy’s new PM is former European Commissioner Mario Monti and is far more credible than his predecessor.

“Another often missed fact is that the Italian Republic, the fourth largest economy in Europe behind Germany, France and the United Kingdom, is also the fourth largest holder of gold, with 2451 tonnes that could be used for financing any short-term requirements.”

Stanzione adds that: “Italian banks have already recapitalised and do not require bailouts. They did not get loaded up in mortgage debt like Spain and many Italians still prefer to rent property.”

ITALIAN EQUITY ETFs

Credit Suisse ETF FTSE MIB (CMB1)
London listed, TER 0.33%

iShares FTSE MIB (IMIB)
London listed, TER 0.35%

Amundi ETF FTSE MIB (FMI)
Euronext, Borsa Italiana listed, TER 0.18%

DB X-trackers FTSE MIB Index ETF (XMIB)
Xetra, Borsa Italiana, SIX listed, TER 0.30%

Amundi ETF MSCI Italy (CI1)
London, Euronext, Borsa Italiana listed, TER 0.25%

He also believes Italy is the most likely eurozone country to receive more investment from China in the coming years, with Italy having leading brands in fashion, cars, motorbikes, furniture and, of course, food and drink. “When people say Italy is another Greece,” continues Stanzione, “I say, name me one Greek exporting company. How many Italian brands can you name?”

Italy’s major stock market index, the MIB, is back down to near 2009 levels and down 13% so far this year. “Investors can use an Exchange Traded Fund to track its performance,” says Stanzione. He agrees that this is a controversial contrarian trade and only advises using a small amount of risk capital, but “investing in Italy at these depressed levels could yield a 30% plus profit by year-end,” reckons Stanzione.

There are number of ETFs available to investors looking to take a punt on Italy from a range of different ETF providers. However, they are all focused on just two indices: the FTSE MIB and the MSCI Italy.

The FTSE MIB, developed by FTSE and Borsa Italiana, is the primary benchmark index for the Italian equity market. Capturing approximately 80% of the domestic market capitalisation, the index is comprised of highly liquid, large-cap companies across the main Italian sectors. The index is a market capitalisation-weighted index after adjusting constituents for free float.

The index currently measures the performance of 40 companies and is derived from the universe of stocks trading on the Borsa Italiana exchange. Its top ten holdings are Eni, Enel, Unicredit, Assicurazioni Generali, Intesa Sanpaolo, Saipem, Telecom Italia, Fiat Industrial, Tenaris and Snam, while its top five sector weights are Financials (29.46%), Oil & Gas (21.82%), Utilities (18.07%), Industrials (9.83%) and Consumer Goods (8.21%). iShares, Credit Suisse, DB X-trackers and Amundi offer European-domiciled ETFs tracking this index (see above).

The MSCI Italy Index does much the same thing as the FTSE MIB. Essentially, the MSCI Italy seeks to measure the performance of the Italian equity market by capturing 85% of the publicly available total market capitalisation. Component companies are adjusted for free float.

The index’s top ten holdings are the same as for the FTSE MIB; the sector weightings, however, are slightly different. The MSCI Italy’s top five sectors weights are Energy (35.11%), Financials (25.64%), Utilities (17.65%), Industrials (8.65%) and Telecoms (6.5%). This index is tracked by the Amundi ETF MSCI Italy (see above).

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