Must-know: Investing in Italy
Overview: A guide to investing in the PIIGS nations (Part 8 of 15)
Investing in Italy
Italy has just entered its third recession in six years—since 2008. Figures on Wednesday, August 6, from the National Institute for Statistics (or ISTAT) showed that Italy’s gross domestic product (or GDP) fell 0.2% in the second quarter. This compounded the 0.1% decline in the first quarter. It fulfilled the narrow economic definition of a recession.
However, it seems like Italy never emerged from its previous recession. In the past 12 quarters, it has managed just one quarter of positive growth—expanding 0.1% in late 2013.
Market reaction to Italy falling into recession
The news of Italy entering into a recession for the third time in six years caused Italian stocks to fall more than 2%. Italy has the third-largest bond market in the world. It saw the risk premium on its ten-year government bonds widen by 12 basis points, over those of Germany, from the close on August 5.
Those investing in Italy through exchange-traded funds (or ETFs) like the iShares MSCI Italy Capped Index Fund (EWI) have gained ~2% since August 7—up to August 12. The iShares MSCI Italy Index Fund is the second best performing fund in the PIIGS group. So far, it has returned 6.28% this year. The fund manages an asset base of $1.7 billion. It tracks the MSCI Italy 25/50 Index.
ENI SPA (EIPAF) is the only stock in the fund that has double-digit allocation in the fund equivalent to 16.91%. The fund’s other top holdings include ENEL Ente Nazionale per L’Energ Elet SPA (ESOCF), Intesa Sanpaolo (IITSF), and UniCredit SpA (UNCFF).
While the recovery in Portugal and Italy may have slowed because of recent economic events, the other PIIGS (or Portugal, Ireland, Italy, Greece, and Spain) nations are working towards recovery. In the next part of the series, we’ll look at what Ireland has achieved so far in its path of recovery from the Eurozone crises of 2009.
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