beyondbrics

Beppe Grillo

The uncertainty surrounding the Italian election result has upset investors around the globe, not least in emerging markets. While Beppe Grillo, the comedian whose movement won 25 per cent of the vote, may be laughing, fund managers are not.

Following losses on Wall Street, the MSCI Asia ex-Japan index fell 1.2 per cent on Tuesday. Closer to Rome, the impact was bigger, with the MSCI East Europe index down 1.9 per cent in early trading. Watch out for a nervous day.

As Tony Barber and Guy Dinmore reported for the FT, Italy is “staring at a period of prolonged political instability following a general election in which voters delivered a resounding rebuff to austerity policies with little hope of any party mustering a governing majority.”

Grillo’s anti-establishment Five Star Movement was set to win the most votes of any single party with 25.53 per cent, just ahead of the centre-left Democrats on 25.47 per cent. Silvio Berlusconi’s People of Liberty was in third on followed by reformist Mario Monti’s Civic Choice in fourth.

However, the Democrats were on course to take a very slim majority in the lower house thanks allies putting them ahead with 29.62 per cent of the vote, against 29.1 per cent for Berlusconi’s alliance. Grillo’s team fought the election alone.

The miserable 10.6 per cent score for Monti, who has overseen an austerity programme backed by Italy’s EU partners, is a slap in the face for Brussels and Berlin as well as Rome’s economic reformers. Little wonder that investors almost everywhere are concerned.

In emerging Asia, the Hang Seng closed down by 1.3 per cent and the Shanghai Composite by 1.4 per cent. Asian currencies were also generally slightly weaker against the dollar, with the South Korean won, for example, shedding 0.2 per cent.

In eastern Europe, Russia’s $-denominated RTS index was down by 2.2 per cent around 8.30 GMT and Poland’s WIG20 by 1.1 per cent. The Russian rouble was 0.5 per cent lower against the euro.

Related reading:
Italy braced for political deadlock, FT