Italy is still struggling with issues within its banking sector, an important consideration with EWI because financial services is the largest sector allocation in the largest Italy exchange traded fund. The Italian government has been under pressure to calm concerns over its ailing banking system. Financial services is by far the largest sector weight in EWI.
“Our baseline scenario assumes that Italy is likely to push ahead with reforms to further open product and service markets to deliver an improved business climate. However, progress is expected to be more labored in other areas. For the banking sector, we do not envisage any rapid correction of the non-performing loan (NPL) issue; that suggests credit flows to non-financial firms will remain disrupted, remaining a major obstacle to any significant renaissance of private investment,” according to Markit.
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