Italy safer than Spain, say fund selectors at IE’s Milan forum

The launch of new products able to soften consequences of the eurozone crisis on investments, as well as a more cautious approach to emerging markets, has been the common denominator of the six presentations delivered today to the almost 60 delegates attending InvestmentEurope’s Fund Selector Forum in Milan.

UBS Global Asset Management, AllianceBernstein, Natixis Global Asset Management, M&G Investments, Legg Mason Global Asset Managemet and Ignis Asset Management discussed latest market trends and anti-crisis products taking the needs of Italian fund selectors as their focal point.

Following the Spanish €100bn banks bailout by other eurozone members, delegates confirmed contagion fears are slowly moving to Italy.

“Uncertainty has increased from last week, but the feeling is that the outcome of the crisis will only be played at political level,” one of the delegates told InvestmentEurope.

The outlook on Italy remains more positive than the one on Spain. The consensus view shared by delegates was that Italian banks are less exposed to toxic real estate assets that have caused the collapse of the Spanish banking system.  

The same view is shared by rating agency Fitch Ratings. Speaking today in Oslo, Fitch’s managing director Ed Parker said Italy is unlikely to need a bailout as Europe’s third-largest economy is in a better state than Spain.

According to Bloomberg, “Italy is much closer to getting to a sustainable macro-economic position. It is now running a pretty small budget deficit, has a much lower current account deficit, doesn’t have these problems in the banking sector,” Parker said.

Fitch’s main scenario is that Italy won’t need external support, he added.

Meanwhile, the outlook on Spain remains very negative.

“The bailout of the Spanish banks is yet another policy announcement that does little more than buy time and remove short-term systemic risk, perhaps until Sunday. A ‘positive’ Greek election result will buy more time but eventually the politicians will have to choose the path between full fiscal union or break-up,” said Ted Scott, global strategy director at F&C.

Delegates at the InvestmentEurope Italy forum seemed to agree.

“The bailout of Spanish banks will have effects only in the medium to long term. In the short term, it has added €100bn debt on European taxpayers, which will be allocated to a non-healthy sector. The bankruptcy of some Spanish banks would have come at a higher cost for account holders, but would have shown a powerful market mechanism, beneficial in the long term,” one said.

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