After 26 years, the Italian stock market hit a new high
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When looking at the ranking of the best-performing stock indices globally so far this year, it’s easy at first glance to overlook the Italian stock market, even though the FTSE MIB index has been gradually climbing higher over the past three years and, at the end of May this year, hit a new all-time high for the first time in about twenty-six years. The financial sector carries significant weight in the index; however, the top three best-performing components so far this year are not bank stocks, but rather the shares of a technology company, an energy company, and an industrial firm.
If we look at the list of the world’s best-performing stock indices so far this year, the top spot is currently held by the South Korean stock market, which has risen by nearly 100 percent year-to-date (as of July 1), while the Taiwanese stock index stands in third place on the podium with a gain of more than 60 percent, as the rise in the share prices of artificial intelligence-related stocks has provided a massive tailwind for the stock markets of both countries in recent times.
In contrast, if we expand the list to include the top 25-performing stock indices instead of just the top 10, it already includes several European indices. This time, we’re focusing on the Italian stock market: the FTSE MIB index’s ~14 percent gain so far this year was enough to place it at No. 22 on the list. It is worth noting, however, that by the end of May this year, the index had managed to break through its previous all-time high, set in early 2000.
The three largest companies on the Italian stock exchange, based on market capitalization, are UniCredit, Intesa Sanpaolo, and Enel (the first two are banks, and the latter is a utility company). While the two banks mentioned performed particularly well last year, they have so far managed only modest gains this year, and bank stocks do not currently occupy any of the top four spots among the best-performing Italian stocks so far this year.
The best-performing component of the index so far this year is STMicroelectronics, which specializes in semiconductor design and contract manufacturing: The company is expanding its presence in the field of artificial intelligence and, with a focus on infrastructure supporting both cloud-based and physical AI. The company recently raised its data center revenue target for this year after signing major agreements with several large technology companies (Amazon AWS, Nvidia). The analyst consensus currently forecasts double-digit percentage growth in revenue and EBITDA for both this year and next, while the consensus expects triple-digit percentage growth in adjusted EPS for the same period.
Saipem currently ranks second on the podium: the oilfield services company stands to benefit from the global upswing in energy industry services, and thanks to major contracts won in Qatar and Saudi Arabia, some industry analysts expect the company’s fleet to be nearly fully utilized by the end of this year. The consensus forecast for this year projects minimal revenue growth of less than 1% for the company; however, EBITDA and EPS are both expected to grow at double-digit rates this year. The third best-performing stock is Prysmian: among other things, the company manufactures electrical cables for the energy and telecommunication sectors. The consensus expects the company to post double-digit percentage growth in revenue, EBITDA, and EPS this year.
For the MSCI Italy Index, which tracks the Italian stock market, forward earnings expectations are rising nicely this year, and valuations do not appear to be overly stretched. The MSCI Italy index’s 12-month forward P/E ratio of 12.88 is lower than the valuations of the MSCI Europe index (15.41) and the MSCI ACWI index (17.63). The FTSE MIB index shows an uptrend over the longer term, so it will be worth continuing to monitor the Italian stock market in the future.
FTSE MIB index technical picture
The index is moving in an increasingly steep hyperbolic pattern. When even the steepest trendline breaks, a reversal may be on the horizon. The zone above 50,000 can be considered a premium zone due to the years-long rally that preceded it; in other words, the risk-reward ratio isn’t very favorable anymore, and looking to buy at these levels may seem like a late entry. In an uptrend, if the index breaks above 53,125, 56,250 might still be within reach. A close below 50,000 could trigger a correction.
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