Italy is the third largest economy of the European Union. Though it is not a very popular destination for global investors. In this post we will analyze Italy’s 4 most important stock market indices.
Despite being the third largest economy in the euro zone and the European Union, and a member of the G7, Italy is not one of the countries considered economically strong. It is considered relevant, but only because of the many challenges it faces.
Within the European stock market, the UK, France and Germany receive almost all the attention and coverage of the financial press. However, the stock markets of somewhat smaller countries, such as Italy or Spain, are often regarded as non-important.
As a result, very few people know the most important stock market indices of a country like Italy. That may be interesting for us, whether we want to invest there through an ETF or index or simply analyze its historical returns.
One aspect you should be aware of is that the Italian stock market is among the worst performers since the beginning of the 21st century. In fact, if we had invested at the beginning of the century, we would still be losing money, more than 2 decades later. And without taking into account fees, taxes, or inflation.
This negative stock market performance is due to the poor economic development of the Southern European country during this period. This has weighted heavily on the banking sector, which was the dominant sector at the turn of the century. Let us remember the financial crisis started in 2008 or the European debt crisis that reached its peak in 2012.
Despite all this gloom, Italy still has some very good companies. These include Enel, UniCredit, Eni, Telecom Italia, Generali and Ferrari.
The FTSE MIB (Milano Indice di Borsa) index is the main index of the Italian stock exchange. It was introduced in 1992 under the name COMIT 30, when it was calculated by the Milan Stock Exchange and composed of the 30 largest listed companies in the country.
In 2003, the index grew to 40 companies, with some smaller corporations joining it.
Since 2009 the index has been owned and published by FTSE Russell, a subsidiary of the London Stock Exchange. That was when the current name of FTSE MIB began to be used.
Companies in the index are weighted based on their free float-adjusted market capitalization. Some of the largest companies in the index are Enel and Unicredit. And even the Juventus football club is part of the FTSE MIB.
If you want additional information about the index, you can take a look at the FTSE Russell website.
FTSE Italia Mid Cap
The FTSE Italia Mid Cap index is second-tier index of the Milan Stock Exchange, also published by the company FTSE Russell.
As the name suggests, it is made up of “Mid Cap” companies. In the FTSE Italia Mid Cap index we can find the 60 largest companies, after the 40 included in the FTSE MIB.
This allows us to invest in companies that are somewhat less internationalized, so their performance is more closely correlated with the performance of the Italian economy. Some of those companies are actually well-known outside of the country, such as De’Longhi, Geox or Piaggio.
FTSE Italia Small Cap
The FTSE Italia Small Cap index is the third index of the Italian stock exchange, composed of small-cap companies and also published by FTSE Russell.
The exact number of shares in the FTSE Italia Small Cap index varies over time. In it we can find all companies that meet the criteria of liquidity and minimum size to be included in the FTSE MIB and FTSE Italia Mid Cap indices, but that, due to their lower market capitalization, fail to enter those indices
The FTSE Italia Small Cap is less internationalized than either the FTSE MIB or the FTSE Italia Mid Cap.
Finally, another way to invest passively in Italy is to look for an ETF that tracks the MSCI Italy index. This index is published by MSCI.
The MSCI Italy is an index composed of all Italian stocks that meet the eligibility criteria to be part of the global MSCI World stock Index. The exact number of stocks fluctuates over time but is usually between 25 and 30. Those are the most representative of the Italian economy.
As a result, it bears many similarities with the FTSE MIB, although it is slightly more concentrated. Enel, Stellantis, Ferrari or Intesa Sanpaolo are some of the companies with the highest weighting in the MSCI Italy.
For additional details on this index, you can visit MSCI’s website.
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And to learn more about the stock market indices of another important European country, click on the following link.