MILAN Shares in Silvio Berlusconi's television group Mediaset (MS.MI) rose as much as 10 percent on Monday in volatile trade as investors reacted to the possibility he could post a stronger-than-expected election result.
Projections from an early vote count showed his center right group slightly ahead in the Senate, the reverse of earlier predictions from telephone polls that showed the center left taking a strong lead in both houses of parliament.
Mediaset shares ended up 2.1 percent, outpacing the Milan blue chip index but below earlier highs as the stock tracked a broader retreat due to worries of a hung parliament.
While traders said there was no specific reason except short covering to explain the rise, the strong volatility showed that Mediaset is more sensitive to changes in the political landscape than other companies.
Claudio Aspesi, analyst at Bernstein in London, said a victory for the center left block could lead to a reform of media sector regulation that would hurt Mediaset.
"With a left wing majority and with no influence from the moderate front of (Mario) Monti and (Pier Ferdinando) Casini, Mediaset risks being strongly penalised," Aspesi said.
Another media analyst said: "The numbers could still give Berlusconi a chance to protect himself from hostile regulation".
Mediaset dominates Italy's advertising industry.
Its market leadership, which it consolidated during the long years of Berlsuconi's government, is being challenged by pay-TV competition from News Corp's (NWSA.O) Sky Italia and the emergence of new digital channels.
(Reporting By Danilo Masoni and Claudia Cristoferi; Editing by Helen Massy-Beresford)