Italian equities are now trading at a deeper discount to their European peers than at any time in the past 35 years, according to Reuters. This suggests that investors are becoming increasingly concerned about the risks facing the Italian economy.
There are a number of factors that are contributing to the growing risk in Italy, including:
High public debt:
Italy has the second-highest public debt burden in the eurozone, after Greece. This makes the country vulnerable to rising interest rates and a loss of confidence from investors.
Slow economic growth:
Italy’s economy has been growing slowly for many years. This is due to a number of factors, including an aging population, a rigid labor market, and a lack of investment.
Political instability:
Italy has a history of political instability. This has made it difficult for the government to implement reforms and to attract investment.
The growing risk in Italy is putting downward pressure on the Italian stock market. The FTSE MIB index has fallen by over 20% in the past year. This has made it one of the worst performing stock markets in Europe.
The decline in Italian equities is also having a negative impact on the wider European stock market. The STOXX Europe 600 index has fallen by over 10% in the past year.
It is unclear when the risk in Italy will start to recede. However, until then, it is likely that Italian equities will continue to trade at a discount to their European peers.
Investors who are considering investing in Italian equities should carefully consider the risks involved. They should also monitor the situation closely and be prepared to sell their investments if the risks increase.