21 May 2020
Posted in Banking
Consumer optimism in Italy grows as lockdown is relaxed and wealth managers hope for rebound in 2021, says GlobalData
Italian investors’ preference for safe-haven products will provide a slight cushion to the upcoming 2020 crash. The Italian economy has been shrinking for several years, having a negative impact on the country’s savings and investment market, though it is still expected to show slight growth in 2020. This year will not be the most fruitful for investors and their wealth managers in Italy, but once this crash passes, lockdown eases and the economy begins rebuilding, 2021 is expected to bode well for the investors in the country, says GlobalData, a leading data and analytics company.
According to GlobalData’s Retail Investment Analytics, the Italian retail savings and investment market will grow by 0.2% in 2020. Almost 80% of investor wealth is in deposits, but it is expected that many more wealth managers and investors will be moving their wealth into the asset class to protect themselves from the harsh declines faced in riskier asset holdings. Factoring in the government’s decision to suspend mortgage payments for its quarantined citizens, its €25bn (US$28bn) emergency decree – which includes €10bn (US$11bn) to support families and workers – as well as the move out of equities and mutual funds, we forecast retail deposit holdings to grow by 5% in 2020.
According to COVID-19 Tracker consumer survey, 45% of Italian consumers surveyed on 25 March 2020 expected the coronavirus situation to worsen in the subsequent months. However, optimism has since grown, and figures from 22 April now suggest that only 28% think the situation will worsen.
Sergel Woldemichael, Wealth Insight Analyst at GlobalData, comments: “Italy’s retail equity and mutual fund holdings will suffer the most in 2020. The FTSE MIB, the country’s flagship index, lost a fifth of its value in March 2020 following the announcement of the coronavirus pandemic and the complete lockdown. Since then, April saw the index remain low and volatile, so a slow economic recovery is expected in the country. For 2020, the forecasts of retail equity and mutual fund holdings have been lowered to -26% and -18%, respectively.
“The diversification benefits of mutual fund holdings will mean that the fall will not be as severe as equity fund holdings. However, as mutual fund holdings’ share of the average investor portfolio is five times greater than equities, which hold only 3% on an average, the decline will be more pronounced.”
In a similar flight to safety as deposits, bond growth is expected to benefit somewhat in 2020 as investors seek out the stable return of fixed-income products. However, the revised forecast remains in negative territory with an expected dip of 3.3% in 2020 (as opposed to the 12.4% decline forecast pre-COVID-19), as the European Central Bank’s €750bn ($842bn) emergency quantitative easing program to prop up the economy will see money flood into fixed-income products, thus suppressing yields.