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Italy ETF down for 5th straight day after election

<a href="">Ryan Vlastelica</a>

Fund remains slightly positive for 2018

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The largest exchange-traded fund to track Italy’s equity market fell on Monday, in the wake of a national election that yielded no clear-cut winner and added to the region’s political uncertainty.

The iShares MSCI Italy ETF (EWI) fell 1.5% and was on track for its fifth straight daily decline. The single-country fund, one of the most popular ways to get exposure to specific equity markets, has had outflows of $34.4 million thus far this year, according to FactSet data. It has $710.5 million in assets.

The fund has tumbled 9.9% from a recent closing high hit in late January, though it remains up 1.9% for 2018, having been supported by “an improving economic picture,” according to Chris Dhanraj, head of ETF investment strategy at BlackRock. The fund is up nearly 30% over the past 12 months, although Italy’s economy is still seen as struggling with some negative factors, including high levels of debt.

Populist parties staged a strong showing in Sunday’s vote, and polls showed that they won about half of all votes cast. The results were seen as underscoring the depth of anger among Italians at the country’s direction and the continued power of right-leaning populist parties in European politics. If confirmed, the outcome could crack the door open to the possibility of an alliance between antiestablishment parties to form a new government.

“It is looking like there will be a hung parliament, and this is weighing on investor confidence,” said David Madden, a market analyst at CMC Markets UK. “The lack of political clarity is sending out the wrong message to dealers.”

While the results indicated heightened political uncertainty in the short term, BlackRock’s Dhanraj said he doesn’t “see this as a sustained negative for the euro or regional equities,” although “political noise is poised to remain high until a sustainable coalition emerges.”

The Dow Jones Industrial Average (^DJI)  rose 0.8% on Monday while the S&P 500 (^GSPC)  was up 0.9% and the Nasdaq Composite Index (^IXIC)  was up 0.9%.



Ryan Vlastelica is a markets reporter for MarketWatch and is based in New York. Follow him on Twitter @RyanVlastelica.



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