Factbox: Italian stocks sensitive to election outcome

Cementir Holding NV

02/03/2018 12:58

March 2 (Reuters) - Investors in Italian stocks are bracing
for a possible bout of volatility on Monday, when markets face
the outcome of Sunday's parliamentary election.  urn:newsml:reuters.com:*:nL8N1QK2E1
    Before a blackout was imposed on new opinion polls two weeks
ago, the anti-establishment 5-Star Movement (M5S) was seen as
the most popular single party, but lagging behind a conservative
alliance of Silvio Berlusconi's Forza Italia and its far-right
allies the League and Brothers of Italy. 
    The centre-right bloc may not win a working majority. 
    Here are sectors and stocks potentially most sensitive to
the outcome: 
    
    BANKS
    Banks hold around 345 billion euros ($425 billion) of
Italy's debt and are considered a proxy for sovereign risk.
    Smaller lenders with no international exposure include Banco
BPM  BAMI.MI , UBI Banca  UBI.MI  and Carige  CRGI.MI . The top
two Italian banks, UniCredit  CRDI.MI  and Intesa Sanpaolo
 ISP.MI , are seen as less volatile. 
    Most parties plan to let Italy's budget deficit expand in
the short term to fund their policies. Analysts have warned a
weakening of public finances could turn into a medium-term
factor of weakness for banks. 
    5-Star has pledged to boost compensation for thousands of
Italians who lost savings due to a string of banking crises. 
    A pro-European centre-left coalition could be less
aggressive in opposing tougher rules for the banking industry,
while a government more sceptical of the EU could be more vocal
in defending the banks in their discussions with the EU. 
        
    MEDIA & TELECOMS
    Private broadcaster Mediaset  MS.MI  is controlled by the
family of Berlusconi, a former prime minister.
    Though Berlusconi himself is banned from public office until
2019 due to a tax fraud conviction, he could prove a kingmaker
in coalition talks. If his centre-right bloc wins outright, it
would give Mediaset greater power in a drawn-out pay-TV dispute
with French media group Vivendi and its chairman Vincent
Bollore. 
    The bloc could also sway decisions at communications
regulator AGCOM, which has asked Vivendi to cut its stake in
either Mediaset or phone group Telecom Italia (TIM)  TLIT.MI . 
    In his new role as political power-broker, Berlusconi would
be in a position to exercise influence over Bollore's assets in
Italy under the so-called "golden power", which gives Rome a say
in strategic decisions regarding companies it considers of
national importance, including TIM's network infrastructure. 
    The roll-out of an ultrafast broadband network is key for
most parties. Better incentives should boost TIM and Open Fiber,
owned by state-owned utility Enel  ENEI.MI  and state lender
CDP, whose fibre network competes with that of the incumbent.
    All parties are likely to favour TIM's proposal to put the
network into a legally separate company. 
    The centre-right bloc wants Open Fiber and TIM to merge
their network assets into a single company to boost investment
and guarantee equal access to all operators. 5-Star would like
such a network company to be controlled by the state.
    
    ENERGY 
    Most parties are championing more renewable energy and
energy efficiency. Beneficiaries could be Enel with its focus on
phasing out coal plants to focus on renewable energy and
digitized grids, wind and solar company ERG  ERG.MI  and large
regional multi-utilities like A2A  A2.MI  and Hera  HRA.MI  with
their move to smart distribution networks, renewable generation
and waste management businesses. 
    5-Star has called for an accelerated phase-out of coal
plants, temporary use of gas until green energy covers all
demand, and an end to nuclear power imports. Its opposition to
oil, which it wants phased out by 2050, is a negative for
state-controlled major Eni  ENI.MI .
    
    CONSUMER STOCKS
    A flat tax proposed by the centre-right and low tax policy
of 5-Star should help companies and lift consumer spending.
Possible beneficiaries include shoemaker Geox  GEO.MI ,
electronics group Unieuro  UNIR.MI  and carmaker Fiat Chrysler
 FCHA.MI . Higher disposable income would give more incentive
for people to travel, boosting motorway and airport operator
Atlantia  ATL.MI  and travel caterer Autogrill  AGL.MI .

    STATE-OWNED & STATE-CONTROLLED FIRMS
    The outgoing government listed nearly 40 percent in Poste
Italiane  PST.MI  at the end of 2015. A plan to sell more shares
a year later was scrapped in the face of opposition from labour
unions. A return to that plan would hit the stock. 
    Both 5-Star and the centre-left coalition are not keen on
re-launching a privatisation drive. However, Forza Italia has
pledged to privatise state assets to cut debt. 
    This could hit other firms in which the state holds large
stakes, including Eni, Terna  TRN.MI , Snam  SRG.MI , Italgas
 IG.MI , ship builder Fincantieri  FCT.MI , Saipem  SPMI.MI  and
defence group Leonardo  LDOF.MI .
    A change in government could also push for a management
reshuffle at some of the state-controlled firms.
    
    INFRASTRUCTURE
    The League pledged to invest 22 billion euros over five
years to improve ports and to have 80 percent of the country
connected by high-speed trains by 2022. The centre-left PD also
said it wanted to expand the high-speed railway network.
    This could boost contractors Salini Impregilo  SALI.MI ,
Astaldi  AST.MI , cement makers Cementir  CEMI.MI  and Buzzi
Unicem  BZU.MI  and train signalling company Ansaldo STS
 STS.MI .
    
    DEFENCE
    The PD has pledged to almost double defence spending to 2
percent of GDP by the end of the next legislature and the
centre-right block has vowed to up security measures, which
could boost domestic player Leonardo  LDOF.MI .
    5-Star has asked for a spending review in the sector and has
criticised the F-35 fighter jet programme. 
 


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Graphic - Italy's election    http://tmsnrt.rs/2BNVobt
For full election coverage    cpurl://apps.cp./cms/?navid=72745
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 (Reporting by Agnieszka Flak, Danilo Masoni, Stephen Jewkes,
Giulia Segreti, Francesca Landini, Giulio Piovaccari and Isla
Binnie; Editing by Janet Lawrence)
 ((agnieszka.flak@thomsonreuters.com; +39 02 6612 9450; Reuters
Messaging: agnieszka.flak.thomsonreuters.com@reuters.net))