January 10, 2018 / 10:48 AM / a year ago

Franklin Templeton's Zahn reduces exposure to Italy ahead of election

LONDON, Jan 10 (Reuters) - Franklin Templeton’s David Zahn said on Wednesday he had reduced holdings of Italian bonds in his flagship fund by around a half ahead of expected pre-election volatility, although any selloff would be an opportunity to move back into the market.

Italy will vote on March 4 in an election expected to produce a hung parliament, causing some concern among investors that it will cause instability and possible market turbulence in the euro zone’s third largest economy.

“We’ve reduced the amount of bonds we have in Italy by roughly half in anticipation of the election volatility and we’re looking to increase it again if that volatility comes to bear,” said Zahn, who manages more than 2 billion euros ($2.4 billion).

“We still fundamentally like Italy,” he said.

Zahn said watching for any changes in the Bank of Japan’s monetary policy was also important and could have an impact on European bond markets. (Reporting by Dhara Ranasinghe; Editing by Jemima Kelly)

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