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  • Oct 23, 2014
  • Updated: 5:58pm
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INVESTMENT

Italy steps up pitch to investors from Hong Kong and China

Privatisation push opens the door to more deals along with debt appeal, finance minister says

PUBLISHED : Monday, 28 July, 2014, 4:26am
UPDATED : Monday, 28 July, 2014, 4:26am

Mainland and Hong Kong investors are interested in buying more Italian sovereign debt and investing in Italian state companies undergoing privatisation, Italian finance minister Pier Carlo Padoan told the South China Morning Post.

"My Chinese counterparts signalled interest in taking stakes in Italian companies being privatised. I heard a lot of interest from development agencies in China, private companies in Hong Kong and institutional investors. The investors I talked to confirmed they will do more investments," Padoan said on Friday after a visit to Beijing.

"Many companies in Hong Kong have a stake in Italian assets. They have confirmed they will make it stronger. Hong Kong will play an even more important role in Italian investment in China and reciprocal investment in Italy," he said.

More shares of Enel, Italy's largest power company that has been partly privatised, will be put on the market "soon", Padoan added. "We will put on the market government property and local utilities."

In May, the office of Italian Prime Minister Matteo Renzi announced Italy would sell up to 40 per cent of national postal service Poste Italiane, and up to 49 per cent of ENAV, the state-owned flight control company.

Later, Italian state railway company Ferrovie Dello Stato Italiane will be privatised.

Some analysts warn that Italy's privatisation strategy may be too much, too soon.

"Improved trade and investment relations [with China] will not provide a long-lasting solution to Italy's structural problems," said Alicia Garcia-Herrero, chief economist for emerging markets at Spain's Banco Bilbao Vizcaya Argentaria.

"The situation may worsen in the long term as Italy sells much valued technology at discount prices. Renzi should not claim victory too soon, but should first prove that he can implement measures that promote innovation and safeguard Italy's interest vis-à-vis China."

Last week in Beijing, Padoan witnessed the signing of a memorandum of understanding between China Development Bank, a state-owned lender, and Cassa Depositi e Prestiti, an Italian state-owned financing company, under which they will exchange information and conduct joint financing activities.

On Thursday, Cassa Depositi e Prestiti, which is 80.1 per cent owned by Italy's government, announced it was in advanced talks with China State Grid Corp, a state-owned power conglomerate, to sell 35 per cent of subsidiary CDP Reti to State Grid. CDP Reti owns assets in gas and electricity generation. The sale will fetch about €2 billion (HK$20.8 billion), according to Padoan.

Many Chinese investors have acquired significant Italian sovereign debt, he said. "They will continue to do so, because they trust that Italy is sustainable and has good long-term prospects."

In June, Standard & Poor's rated Italy's sovereign debt at BBB/A-2, two notches above junk status, with a negative outlook. In contrast, in April, Fitch Ratings upgraded its outlook on Italy's triple-B-plus credit rating to stable from negative, citing Renzi's reform agenda.

On a visit to Beijing on June 11, Renzi signed with Premier Li Keqiang a three-year cooperation agreement covering sectors such as trade, finance and tourism.

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