Investors are turning bullish on Italy as Draghi prepares new reforms

CNBC reports that an analyst told that Mario Draghi’s new government could be good for financials and consumer recovery plays, as investors turn more bullish on Italian stocks.

“Accomplishing structural reform will be difficult. But after a long period of Italian underperformance, expectations are low. So any signs that Draghi may succeed in achieving growth-boosting structural reforms could lead to an upward rerating of Italian assets,” analysts at investment research firm Gavekal Research said. 

The FTSE MIB, Italy’s main stock market index, has risen about 7% from a low on Jan. 29 on the back of Draghi’s appointment. But experts believe there is further room to grow.

Strategists at UniCredit last week forecast that large and mid-cap segments of the Italian market could have “an absolute performance potential of about 10% from current level” in 2021.

Mislav Matejka, head of global and European equity strategy at JPMorgan, said that Draghi’s policies are “bullish for the Italian equity market, through tighter peripheral spreads, greater policy credibility and the bottoming out in activity momentum, helped by the strong fiscal support.”

“At sector level, this is especially positive for Financials, as well as for consumer recovery plays,” Matejka said.

Financials  are the biggest sector among Italian large and mid-cap firms and consumer discretionary stocks make up the third-largest sector.