Rating agencies should raise their rating on Italy’s public debt, or in general the rating of BTPs. Word of Paolo Savona, number one at Consob, who spoke today, Tuesday 25 June 2024, on the occasion of Consob’s annual meeting with the financial market.
The event took place in Milan, in the headquarters of the Italian Stock Exchange in Palazzo Mezzanotte in Piazza Affari.
Savona addressed various topics in his speech, also commenting on what emerged from the meeting Report for the year 2023 to the Minister of Economy and Finance Giancarlo Giorgetti presented today by the Italian Authority for the Supervision of Financial Markets.
Pay particular attention to the declarations on the issues of the BTP-Bund spread and Italy’s public debt released by president of Consob Paolo Savona.
In addressing the issue of Italian savings, the number one of the National Commission for Companies and the Stock Exchange took a few pebbles off his back, referring both to the solidity of the Italian GDP and to the purchases of BTPs that investors, both retail and foreign institutions continued to push forward.
“The good resilience of the Italian economy and the capacity of internal savings have struggled to translate into a decline in spread requested by the market on our public securities, finally emerged in the first months of 2024, also due to their good reception by Italian savers, followed by a revival of attention from abroad”.
With these words, Savona referred to both the hoarding of BTPs and Italian retail investors continued to do sosubscribing to the editions of BTP Valore – editions that have continued to give shape to the appeal launched by the same Prime Minister Giorgia Meloni “more government bonds for Italians” – than to BTP shopping which saw foreign investors as protagonists.
Too bad, the number one at Consob pointed out, However, this result did not improve the report card that the rating agencies gave to Italy.
“This result, while remaining exposed to the geopolitical risks mentioned, it should also be reflected in an increase in the ratings of Italian public debt, alleviating the burden on real growth due to the higher cost of public debt and thus raising the level of potential income”, warned Savona, reiterating the eternal theme that continues to be the subject of debate among economists and various experts on Italian public debt, and among Italian citizens themselves. Is the BTP-Bund spread fair, or is it too high? (or maybe too low, as someone has pointed out several times?).
The rating agencies Moody’s, Standard & Poor’s and Fitch continue to be too severe towards Italyor are they right? Or maybe too magnanimous? In the case of Italy, the questions always remain relevant, even more so in recent days, with the fear of a contagion effect from France.
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Not just spreads. Savona on savings and delisting from Piazza Affari
BTP-Bund spread aside, focusing on the savings of Italians, Paolo Savona spoke today about the need to channel Italians’ savings into real activity, taking the following initiatives:
- Encourage new listings on Euronext Milan and new admissions on Euronext Growth Milan.
- Curb the delisting of companies, a phenomenon also present on foreign stock exchanges.
- Allow more savings to flow into the stock market and encourage and protect savings plans that cover the life cycle needs of individuals and families, dedicating care to financial instruments equal to that reserved for money.
To be precise, Savona recalled that “the objective of channeling internal savings towards real activity by acting with market instruments has long been on the country’s agenda” and that “its achievement has regained strength with the CD Green paper on The competitiveness of Italian financial markets to support growth, whose process concluded with the approval of the aforementioned Law no. 21/2024″.
This law, underlined the number one of Consob, “simplified the conditions for issuers’ access to the market, in particular of SMEs, and rationalized the intervention of institutional investors. He has also redefined certain procedures for appointing company top management, moving them in part from the choices of managers to those of shareholders”.
Having said this, Savona added, “on this last aspect the assessments were not in agreement and the market will provide a response to the stimulus that the law aims to provide”.
The regulatory system “finally made changes to certain statutory provisions and introduced provisions regarding free float, strengthening of the so-called Destined Assets to support Italian companies and financial education”.
The initiative went further, seeking to provide “also a response to the concerns arising from the delisting of companies listed on Euronext Milan, a phenomenon which is also present on foreign stock exchanges”. The law specifically established that “cancellations could potentially be compensated by the growth in admissions to Euronext Growth Milan of companies that intend to experiment with the opportunity to raise capital on that market for their own development”.
Savona then recalled, again with regard to delisting, that, “in general, the low costs of entry and permanence on the list, the rapid times for carrying out the admission procedures, advantageous taxation and the extent of the liquidity that flows into trading, the absence of which induces companies to turn abroad, where one or more of these conditions are advantageous”.
Stock market capitalization over 800 billion. But pay attention to the GDP ratio
Therefore, stemming the flight of companies listed on Piazza Affari is a priority that has been highlighted several times today, as also emerged from the Consob Annual Report.
The Commission also made the big announcement today, making it known that, according to data relating to the end of May, the capitalization of Piazza Affari has exceeded the threshold of 800 billion euros for the first time since 2006, compared to 754 billion at the end of 2023. To be precise, the market value of the Italian Stock Exchange rose to 835 billion.
That said, the news of the record since 2006 tested by the capitalization of Piazza Affari was overshadowed by the fact that the ratio between market capitalization and Italy’s GDP was once again confirmed to be low: in 2023 it was equal to just 38.4%.
From the identikit on Piazza Affari drawn up by Consob, it also emerged that, overall, at the end of 2023, there were 223 companies listed on the EXM, while on the EGM the number was 203, with 34 new admissions.
However, the farewell to Piazza Affari confirmed itself as a negative for the stock market for Italy:
“The delisting of shares continued to represent a critical phenomenon for the Italian market, having shown only a slowdown in 2023 compared to the previous year.”
In fact, “although the total number of domestic companies listed on Euronext Milan – EXMa regulated market organized and managed by Borsa Italiana – and admitted to trading on Euronext Growth Market – EGM, multilateral trading platform organized and managed by the Italian Stock Exchange itself – rose to 426 in 2023 (from 410 at the end of 2022), much of the increase did not concern the “main EXM market”, but the “EGM, growth market for SMEs”. However, it is a market that also hasrecorded a clear increase in the number of delistings during the year (21 compared to nine in 2022, of which five moves to EXM)”.
In the Consob annual report it is specified that, “specifically, in 2023 there were nine new listings of Italian issuers on EXM and 34 companies admitted to trading on EGM against, respectively, six and 21 revocations. Furthermore, the persistence of conditions of uncertainty regarding global growth prospects and geopolitical instability has led 13 companies to renounce or postpone the process of first admission to listing on the regulated market”.
Consob admitted that “the constant growth in the number of companies admitted to trading on the EGM is a positive sign”. That said, the signal is “insufficient to offset the impact, in terms of capitalisation, of exits from the main market, since the EGM constitutes a minimal share (equal to approximately 1%) of the total capitalisation”.
Among other things, “the latter represents, in turn, a rather small percentage of the gross domestic product”, if we consider that Italy’s capitalisation-GDP ratio has not in fact reached the 50% threshold for years (in particular, at the end of 2023, this ratio stood at 38% in Italy, a slight increase compared to the previous two years but although still far from percentages above 100% in France, close to or above 90% in the United Kingdom and the Netherlands and around 50% in Spain and Germany)”.
