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Italy ETFs
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About Italy ETFs |
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Italy ETFs: Overview and forecast
The Italian investment market isn't much of a headline grabber, and foreign investors could be forgiven for not knowing a lot about it. This is another highly individualized market and economy with its own dynamics, and the Italian ETFs are all based squarely on the internal corporate equity market.
The Italian ETF market isn't particularly big, or highly capitalized, but it does generate both decent trading levels and some interesting margins for traders. This is another market where ETFs are only just starting to penetrate, and once again a European ishares fund is the longest running, best working example.
iShares MSCI Italy Index Fund (AMEX:EWI) has been around for a while, since 1998 and its prices have shown some strong support at various times, notably just before the 2008 crash, when it was at a high point of about $35. The fund then took a vertical dive, winding up just below $10, before starting on an interesting rise back up to around $16 in late June 2009.
The interesting thing about these moves is that while the pre and post crash periods showed pretty high volumes of trade, the March- June 2009 rise of nearly 60% on the lows didn't attract anything like the same volumes. This fund occasionally shows very large spikes in volumes, so as you can see, the dynamics of this market are a bit different.
Short term (6 months)
The short term outlook has to be qualified, like most subjects related to the Italian economy, with the possibility of political turbulence or economic issues. Italy has some large corporate entities, and these are pretty healthy as investments, but the market tends to respond sensitively to the political and economic scenarios with which it's so regularly afflicted.
That can distort trading prices, sometimes positively, sometimes negatively. The overall indications are that the ETF market is currently relatively stable, and not likely to produce too many sudden shocks, with some positive upside.
Medium term (2 years)
Like France and Germany, Italy has a demographic issue in terms of its investment funds. Unlike France and Germany, the general perception is that the Italian investment market is rather undercapitalized, particularly in the south, and doesn't have the same growth potential because of a smaller, less affluent, middle class investment base.
Core investment patterns are therefore quite different to other Western nations. EWI itself isn't a high capital fund, although it would rank as a middleweight in terms of comparable European funds. That will reduce the level of interest from fund managers who can just as easily set up in France, the UK or Germany. The medium term is likely to be flatter in Italy than elsewhere in Europe.
Long term (5 years)
The longer term outlook is a bit stronger than the medium. Italy is a large domestic economy, and it does contain a good working potential investment base for funds. The ishares model of local national markets is also a consideration here. As investment spread management practices go, this is a particularly good model, and it's reasonable to think that other fund operators coming into the European market will be aware of that.
Competing funds can be expected to be moving in as the global recovery improves, and that will also generate more power running through the trading rooms. There will be a natural evolution of expanding interest as that process develops. The long term has definite growth potential.
Qualifiers to projections
Any Italian will tell you, half proudly and half sadly, that Italy isn't like other countries. Italy has its strengths and weaknesses, and those who don't know the culture, which takes some learning, can find themselves utterly lost. That applies to investment, too.
Get a reliable view of the place first. You may not get physically lost looking at your investment portfolio, but you can get totally lost mentally trying to figure out the various ins and outs of Italian business and the economics involved. Italy isn't an easily fathomable place in that regard, and investors are strongly advised to take a long hard look at investments before making any decisions.
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Last Updated on: 2010-01-14 02:03:40 |
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