The Ftse Italy Mid-Cap index (-5.1%) underperformed the main index by 1.4% over the past month, while the Ftse Italy small caps index (-5.3%) underperformed the market by 1.6 %age points
Randone: “If one looks at redemptions from Pir funds, one can certainly assume that many investors, because of the positive performance at the five-year maturity, have decided to cash out in order to direct savings to other funds and markets.”
Over the past month, all major global equity indices are cashing in on negative or neutral performance, including the Ftse Mib, which leaves 3.7 % on the ground as of Oct. 19, 2023. In the specific case of Italy, an underperformance of small- and mid-cap companies compared to those with larger market capitalization is evident. The Ftse Italy Mid-Cap index (-5.1%) underperformed the main index by 1.4%, while the Ftse Italy small caps index (-5.3%) underperformed the market by 1.6 %age points. Weighing in, among other factors, the “pitfall” of Pir: Assogestioni data for the first half of the year in fact show 1,425.4 million euros in outflows, and preliminary data for July-August would confirm this negative trend.
PIR: Redemptions Amounting to 1.8 Billion in Eight Months
“If we look at the reasons for redemptions from Pir funds, we can certainly assume that many investors, because of the positive performance at the end of the five-year period (the minimum investment period required to enjoy the tax benefits on capital gains), have decided to cash out in order to direct their savings to other funds and markets,” explains Andrea Randone, head of mid small cap research at Intermonte. Redemptions in the first eight months of the year amounted to about 1.8 billion euros, and as of today, there does not yet seem to be a basis for any reversal of the trend, Randone warns. “According to press reports, the Italian government is studying an amendment to allow investors to hold more than one personal savings plan. This would entail no additional cost to the government, as the investment ceiling of 40 thousand euros per year per person (or 200 thousand euros over five years) would remain unchanged. We very much welcome this initiative which, if approved, we think could boost inflows to Pir funds,” the expert hopes.
An Unfavorable Scenario for Mid and Small Caps
Meanwhile, deflating small- and mid-cap companies in the stock market would also seem to be contributed by an already weak macro picture further shaken by the recent crisis in Israel. “Meanwhile, government bond yields are struggling to normalize as government deficits accumulated over the pandemic years by major global economies creating an oversupply,” Randone explains. In particular, in Italy, “we have also witnessed a widening of the spread between the yield of 10-year BTPs and 10-year German Bunds due to the budget maneuver for 2024, which out of a total of 24 billion euros allocates 16 billion from new debt and the remaining 8 billion from spending cuts, fueling fears about the sustainability of the deficit/GDP ratio,” recalls Massimo Trabattoni, head of Italian equity at Kairos. In short, an unfavorable scenario for mid and small caps, which, Randone recalls, represents a relatively riskier asset class, especially in terms of liquidity.
In such an environment, Intermonte analysts suggest focusing on stocks that enjoy excellent corporate visibility, at least in relative terms. “We think valuations are particularly attractive in some sectors, such as business technology services,” Randone suggests. For Trabattoni, this past quarter, in particular, represents “an excellent window for selective buying of those small and mid-caps whose valuations are currently compressed due to the recent rate hike, but which have demonstrated the resilience of their business model and margins in response to the inflationary shocks and global supply chain bottlenecks of recent months.”
SMEs Stock Market, 20 Top Stocks Since the Beginning of the Year (and 20 flops)
Finally looking in the rearview mirror at the top 20 performers since the beginning of the year, 13 beat the Ftse Mib. At the top of the podium Saes Getters (a manufacturer of advanced functional materials) and Maire Tecnimont (an Italian corporate group active in the engineering, technology and energy sectors) respectively rose +44%. They are followed by Buzzi-Unicem (+40%), Salcef Group (+28%), Cementir (+26%), The italian sea group (+25%), Banca Ifis (+24%), Bff Bank (+23%), Cyberoo (+22%), Iren (+22%), Webuild (+21%), Omer (+19%) and Credito Emiliano (+18%). On the opposite side, collecting the worst performance since January are Aquafil (-63%), Sciuker Frames (-53%) and Safilo (-51%).
