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BlackRock Inc. (BLK), the world’s biggest money manager, is buying Italian stocks amid optimism that Prime Minister Mario Monti will succeed in cutting debt and boosting economic growth.
Monti, who replaced Silvio Berlusconi in November as Italian bond yields jumped to euro-era records, is implementing a 20 billion-euro ($26.7 billion) package of spending cuts and tax increases to eliminate the budget deficit next year and trim the nation’s 1.9 trillion-euro debt. The austerity measures are weighing on growth, with the European Commission forecasting in February that the economy will contract 1.3 percent this year.
“We’ve gone back overweight Italy, after having had virtually nothing there for a number of years,” Nigel Bolton, who oversees about $14.6 billion as head of BlackRock’s European equities, said in an interview. “As the direct result of Berlusconi going, we started to put money back into Italy and it’s our second-biggest overweight country in Europe.”
New York-based BlackRock, which manages about $3.51 trillion globally, owns shares in Italy’s largest energy company Eni (ENI) SpA and favors utility companies whose valuation are linked to the performance of government bonds.
The nation’s banks, including Intesa Sanpaolo SpA, “look more interesting,” Bolton said. Eni shares rose 9.9 percent to 17.59 euros in the first quarter. Intesa gained 3.9 percent to 1.344 euros during the same period while the benchmark FTSE MIB Index (FTSEMIB) added 5.9 percent.
“I was really amazed and really positive about the transformation in Italy,” Bolton said at the company’s Edinburgh office on March 29. “Labor reform is the tough one, and if we get through that, I think Italy is well on the way to solving some of the issues.”
Monti’s Cabinet passed proposals on March 23 to overhaul Italy’s labor market. The draft law reduces temporary work contracts and allows employers more leeway in firing.
Italy’s unemployment rate reached 9.3 percent in February, the highest since the first quarter of 2001, the national statistics institute Istat said two days ago. Joblessness among Italians aged between 15 and 24 increased to 31.9 in February from a revised 31 percent in January, Istat said.
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