European Economic Perspectives: Ialy: As good as it gets – or the new normal?

Research evidence excerpt

European Economic Perspectives: Ialy: As good as it gets – or the new normal?

ing away from broad cyclicality towards

inflation protection, defensives and margin resilience. This matters for Italy because the

FTSE MIB is highly concentrated and heavily exposed to financials, utilities, energy and

select industrials (Figure 40Italianmarketconcentration, Figure 39ItalianREVSscorevsmarketweight). With Italy’s forward P/E discount now only

around 11%, the BTP-Bund spread already near low-70bp levels and the top five names

about half the market, the easy re-rating appears largely behind us (Figure 31ItalianforwardP/Ediscount, Figure 30Italy

relativevsBTP-Bundspread, Figure 40Italianmarketconcentration). We therefore see Italy less as a broad beta catch-up trade and more as a

selective income and resilience market: utilities, energy and select industrial/

electrification exposure fit the current regime best, while banks remain structurally

healthier but less likely to be the incremental source of alpha in a slowdown (Figure 32ItaliandividendpremiumvsP/Ediscount,

Figure 38ItalianREVSheatmap, Figure 41ItalianBanksrelativevsBTP-Bundspread). Read more here.

Sector view: Construction (Julian Radlinger)

For European construction stocks, Italy is ranked as one of the bigger markets for some

companies, representing ~15% of group sales for Buzzi, ~8% for Geberit, ~5% for

Heidelberg, and a low-to-mid-single-digit percentage for Saint Gobain. Cement

companies have benefited from a high level of infrastructure construction demand in

recent years, and have more recently signalled this may be starting to level off now,

while building products companies more exposed to the Superbonus housing

renovation scheme appear to have seen demand sustaining in the past 1-2 years (in line