巴黎银行-意大利-宏观经济-意大利大选：选举结果及市场影响-20180302-23页_2mb

2018 Italian Election Outcome Summary

Core Content

The 2018 Italian general election resulted in a hung parliament, with no major political bloc securing an absolute majority. This outcome reflects a significant shift in voter sentiment towards anti-establishment parties, particularly Five Star Movement (M5S) and The League (LNZ), which together captured around 50% of the vote and potentially more than 50% of the seats. This marks a major political realignment, with anti-establishment parties outperforming mainstream parties.

Main Points

• Vote Distribution:

  • The centre-right coalition received the most votes, but not enough for a majority.
  • Five Star Movement emerged as the largest single party.
  • Forza Italia (Berlusconi's party) and the Democratic Party (Pd) performed poorly, signaling a loss of support for traditional parties.

• Regional Performance:

  • The League gained strong support in the north of Italy, likely due to immigration concerns.
  • Five Star Movement did particularly well in the south, attributed to economic underperformance in the region.

• Political Implications:

  • A new government will need to include either Five Star or The League, or both.
  • A coalition between Five Star and The League is politically challenging but not impossible.
  • A technocrat government or government of national unity is a potential fallback if no political coalition is formed, though it is expected to be unstable.
  • A new election is a last resort, but unlikely to change the outcome significantly.

• Market Impact:

  • The Italian election outcome has limited impact on the EUR in the short term due to reduced long EUR positions and lower risk premium.
  • Italian equities and banks have underperformed, as investors remain cautious about the political uncertainty and potential policy changes.
  • Credit bonds have seen outflows in both the US and Europe, especially in high-yield segments, due to fears of higher interest rates and wider spreads.

Key Information

• Market Uncertainty: The political outcome introduces high uncertainty, which may lead to a prolonged government formation process, potentially lasting more than four to six weeks.
• Economic Outlook: Italy is outperforming the eurozone in terms of growth and fiscal improvements, but these have not yet been reflected in credit ratings.
• Credit Risk: The 10y BTP-Bund spread is expected to widen only slightly, as BTPs are undervalued and domestic investors are likely to capitalize on any further spread widening.
• FX Strategy: BNP Paribas recommends long EURCHF positions, targeting a recovery to 1.18, due to Swiss National Bank intervention possibilities.
• Equity Strategy: Italian midcaps are seen as more resilient due to domestic ownership from the PIR program, while large caps may underperform in the short term.

Macroeconomic Backdrop

• Economic Growth: Italy is above trend in growth, with investment recovery and fiscal improvements.
• Budget Deficit: Italy has a primary budget surplus of 1.5% of GDP, indicating improved fiscal position.
• Credit Ratings: While growth and fiscal improvements are positive, rating agencies have not yet adjusted their outlooks.
• Interest Rates: The weighted average interest rate on Italian debt is still 150bp higher than market rates, providing some support for debt roll-over.

Market Reactions

• Equity Markets: Italian equities and banks have underperformed relative to their benchmarks, suggesting market caution.
• Credit Bonds: High-yield bonds have seen outflows, while investment-grade bonds remain under pressure.
• FX Market: The EUR has had a muted reaction to the election result, with long EUR positions being scaled back and EURCHF being a preferred trade due to Swiss intervention risk.

Legal Notice

• This document is a marketing communication and not independent research.
• It is intended for professional clients and relevant persons only.
• The information is not investment advice and does not constitute a prospectus.
• Indicative prices and performance data are simulated and not guaranteed.

Conclusion

The 2018 Italian election has resulted in a political stalemate, favoring anti-establishment parties. This outcome introduces uncertainty for market participants, particularly in equity and credit markets, but fiscal and economic improvements suggest a positive long-term outlook. FX markets are expected to remain cautious, with EURCHF being a preferred trade. The formation of a government is expected to be prolonged, and market positioning suggests a limited near-term impact on the BTP-Bund spread.