MILAN Dec 1 With only three days to go before
Italians vote in a referendum that could tip their country into
political chaos, investors are trying to work out how to play
the ballot on the stock market.
The prospect that Prime Minister Matteo Renzi could step
down if, as polls suggest, his constitutional reform is rejected
have already triggered a sell-off in banking stocks, considered
as most vulnerable to political turmoil.
But domestic and overseas analysts alike are looking beyond
banks to other industries and individual companies that could be
at the sharp end of the fallout from Sunday's vote, no matter
which way it goes.
Heightened country risk and higher sovereign bond yields in
the event of a "No" vote could undermine capital-intensive
utilities and telecom companies with high debts, while those
companies that make most of their money overseas could be safer
Here are the top non-bank stocks and sectors to watch out
for on Monday when the market opens and possible implications if
the "No" vote wins the day:
1) FERRARI AND THE OUTPERFORMERS
The luxury sports car maker is among global players likely
to suffer little impact from a marginal "No" vote, according to
analysts. Spun off from Fiat Chrysler at the start of
the year, Ferrari has reported record earnings this
year. The United States remains the largest single market for
Ferrari, with only a small portion of sales made in home market
Italy. Ferrari - and other luxury names - is cushioned by its
exclusive status, a growing number of customers from among the
super rich, especially from Asia, and a waiting list for its top
models of more than a year.
Among other companies with leading brands and limited
exposure to Italy, analysts mentioned fashion houses Moncler
and Ferragamo and also cable maker Prysmian
, packaging firm IMA and hearing aid maker
Amplifon. "We would increase the exposure to high
quality Italian equities on weakness but one should be prepared
to take some short term pain," broker Mainfirst said.
2) UTILITIES AND REGULATION RISKS
Italy's biggest utility Enel, saddled with 36.8
billion euros ($39.00 billion) of net debt, is sensitive to
rising sovereign bond yields that prompt higher refinancing
costs and make dividend yields less attractive. HSBC analysts
said a "No" vote could also fuel worries about tougher
regulation and even windfall taxes like the 2008 'Robin Hood
Tax' that battered the sector before being declared
unconstitutional last year. More exposed to such risks are pure
regulated utilities like grid players Snam, Terna
and Italgas which juggle with high debt but
which, unlike Enel (that gets more than half its earnings
abroad), have nearly all their business in Italy.
State-controlled Enel could also face top management
uncertainty should any new government opt to replace current CEO
Francesco Starace and could face challenges to plans to roll out
an ultrafast broadband network nationally. Political uncertainty
could also derail Rome's plans to make the fragmented local
utility sector more efficient by encouraging larger regional
players like A2A, Acea, Hera and Iren
to buy out smaller rivals. "The Renzi government has
long been a supporter of the need for consolidation in the local
public services sector ... and a no vote would be bad news on
this front," broker Intermonte said.
3) TELECOM ITALIA AND BROADBAND UNCERTAINTY
Italy's biggest phone group, burdened with 26.7 billion
euros of net debt, could also be hit by rising bond yields and
macroeconomic uncertainty but to a lesser extent than utilities.
Its high leverage puts it among the most exposed if there is a
"No" victory. Some analysts expect Italy to stick with plans to
roll out an ultrafast Internet network across the country. This
has favoured a rival project launched by utility Enel,
heightening competition for the former phone monopoly, which is
also betting on broadband for growth. But other analysts believe
a leadership change in Rome could help Telecom Italia and its
broadband joint venture partner, Swisscom unit Fastweb.
"For Telecom Italia the negative impact from macro could be
partly offset by a reduced threat from Enel," Deutsche Bank
said. Any reduced support for Enel's broadband ambitions could
also impact Vodafone and VimpelCom's Wind, which
have committed to using Enel's fibre network.
4) ENI, THE RESILIENT PLAY
Italy's biggest listed company is seen as a resilient play
since it has most of its business outside Italy and responds
first and foremost to the vagaries of the oil price, boosted
this week by OPEC's agreement to curb oil output. "Energy is
likely to be resilient to a "No" vote given its global nature,"
But a redrawing of political lines in Rome could threaten
CEO Claudio Descalzi whose strategy to focus the
state-controlled oil company on upstream work has been welcomed
by the market. His position comes up for reappointment next
April-May. State-controlled oil service company Saipem
has problems of its own from the tough conditions in its
industry. But it could also find higher sovereign bond yields a
headache as it presses ahead with refinancing debt after its
divorce from former controlling investor Eni.
($1 = 0.9436 euros)
(Reporting by Danilo Masoni, Stephen Jewkes and Agnieszka Flak;
Editing by Jamie McGeever and Jane Merriman)