ROME: That’s according to Societe Generale SA, which sees the FTSE MIB Index capping its 25 percent jump this year with another 40 percent gain by 2017.
Tax and labor reforms in Italy combined with European Central Bank stimulus will boost corporate profits, while receding concerns about the fate of the euro zone will tempt global fund managers holding the most cash since 2008, says Roland Kaloyan, a Paris-based strategist at the French bank.
“Most of the investors I’ve met in Asia are still looking for an entry point into Europe,” said Kaloyan, the head of European equity strategy at Societe Generale. He spent the past week meeting with clients in Singapore, Tokyo and Sydney. “In the coming weeks and months, more money will be coming into European equities. Italy and France are our favorite markets.”
France’s CAC 40 Index has jumped 19 percent in 2015. Investors willing to endure Italy’s wildest stock-price swings in three years were rewarded with one of 2015’s largest rallies in the world.
That’s also put Italian stocks among the most expensive. The valuation on the FTSE MIB rose to 18 times estimated profit this week, a level not seen since at least 2005 and that briefly surpassed that of the Standard & Poor’s 500 Index.
The two biggest exchange-traded funds tracking European shares saw more than $18 billion of inflows in 2015. Banca Popolare di Milano Scarl, Italy’s oldest cooperative bank, soared 85 percent this year for the largest gain in the FTSE MIB.
Still, funds worldwide are waiting it out, according to a Bank of America Corp. survey, which showed they’re holding on to the most cash since the collapse of Lehman Brothers. Societe Generale says that may change as worries about Greece fade.
“Greece was the hurdle,” said Kaloyan. “The deal we’ve had gives support for European equities.”
