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Italy: Developing a taste for equity

The Italian market is springing to life. Recent successful high-profile issues and a well-managed privatization programme have whetted investors' appetites. Small and medium-sized companies which have gone to the market have seen spectacular gains. But while Italy's stock market is ready to boom, problems remain with Italy's banking structure and corporate governance. Peter Lee reports

In late June, international equity investors were examining two of this year's highlights in capital markets transactions: the $1 billion IPO for Italian advertising and television group Mediaset and a similar-sized issue of bonds exchangeable into the Italian government's holdings of shares in insurance group Istituto Nazionale delle Assicurazioni (INA).

That Italy should provide two such high-profile new issues in quick succession may be a sign of even greater things to come. John Hyman, a vice president at Morgan Stanley, says: "The Italian market is at a very interesting point in its development. Several trends are at work which could dramatically transform it over the next three to five years." These include: the growth of increasingly sophisticated institutional investors in Italy and a stronger appetite among foreigners for Italian shares; the privatization programme itself; and, perhaps most importantly, the greater willingness of small and medium-sized Italian companies to undertake a public listing.

Largest convertible

The Mediaset deal has aroused intense interest among Milan stockbrokers and foreign investors alike, partly because of its large size and partly because of judicial investigations into the affairs of Fininvest, the company run by former prime minister Silvio Berlusconi, which is Mediaset's 71% majority shareholder.

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