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FTSE MIB Index - Complete Guide On The Milan Index

February 24, 2021 09:25 UTC
Reading time: 18 minutes

What is the FTSE MIB index? Do you often hear about the Italy stock exchange but don't know much about it? Does the abbreviation, FTSE MIB index, seem unpronounceable and you don't know what it represents? If you’d like to know a little more about how the Milan stock exchange index works, what are the shares listed and how it’s been going recently, keep reading: this article’s for you!

fuse mib index

 

Let's get started!

FTSE MIB INDEX: Introduction, the history of the Milan stock exchange

Some people who aren't familiar with the Italian stock market, wonder if it still exists. They ask, "What is the Italian stock market called?", or "Is Italy's stock market closed?". Our understanding of this will be more complete if we look at a brief history of the Italian stock market. Palazzo Mezzanotte was built in 1932, to collect all the stock markets scattered around Milan.

Until the end of the eighteenth century, the negotiations took place in different squares, scattered throughout Milan. In 1808, a decree of the Viceroy Eugène Napoléon, son of Joséphine de Beauharnais, established the Milan Stock Exchange. The headquarters were at the Monte della Pietà.

In the early years of the twentieth century, a new, larger commercial headquarters were needed, due to the exponential growth of financial assets. In 1901, Palazzo Broggi was built in Piazza Cordusio, designed by the architect Luigi Broggi.

With the constant development of finance, the conditions of Palazzo Broggi became inadequate. The new project was assigned to the architect Palazzo Mezzanotte.

The imposing building of Palazzo Mezzanotte was inaugurated in front of the Duce Benito Mussolini in 1932, demonstrating the keen interest of fascism in the new Italian Stock Exchange. The rationalistic features of the building are evident in the small Piazza Affari.

The technology of recent years has strongly affected trading: the so-called "call floor" has been completely revolutionized. The old mechanical display has been replaced by a modern (and less glamorous) telematic system and the noisy trading floor has been closed and converted into the Parterre. Today the temple of finance also houses a multimedia Congress Center.

History of the FTSE MIB

The FTSE MIB Index (Index of the Milan Stock Exchange) is the reference stock exchange index for the Italian Stock Exchange. It replaced the MIB-30 in September 2004. This Italy stock index is composed of 40 of the most traded classes of shares on the stock exchange.

The index was under the administration of Standard & Poor from the day of its inception to June 2009, when it was passed to the FTSE Group, which is owned by the parent company of Borsa Italiana: the London Stock Exchange Group.

What it is - Definition of the FTSE MIB

We have now explained the FTSE MIB index (or as some say, 'what is the FT index'). This Italian stock index is the main reference point for the Italian stock markets and includes the 40 most liquid and large-capitalization shares listed on the Italian Stock Exchange, the Milan Stock Exchange. The FTSEMIB index contains some of the best-known names in Italian business and industry.

The FTSE MIB Index is therefore defined as "the main reference index for the Italian stock markets". It captures around 80% of the national market capitalization. The companies in the index include Campari, Fiat Chrysler, Ferrari, Italgas, Telecom Italia, Mediaset and UniCredit.

The index shows that its components are "derived from the universe of shares traded on the main stock market of the Italian Stock Exchange" and that it "seeks to replicate the broader sectoral weights of the Italian stock market".

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Of the 40 original companies that debuted in the renewed index on June 1, 2009, 16 have continuously maintained their presence in the basket (we’ve indicated these with a *), 18 if we also calculate the returns of Pirelli and Unipol, modifying in some cases, their own name social.

But let's move on: below you can find the FTSE MIB index composition with each title's date of entry into the FTSE MIB INDEX:

First name: Entry date: Sector: Capitalization (in millions of Euros - 2019):
A2A * June 1, 2009 Public services 5312
Amplifon December 27, 2018

Health

5850
Atlantia * June 1, 2009 Industry 18268
Azimut Holding March 22, 2010

Finance

3088
Banca Generali January 2, 2017 Bank 3107
B for Bank August 5 2020 Bank 2331
Buzzi Unicem * June 1, 2009 Building 3656
Campari Milan * June 1, 2009 Food 9572
CNH Industrial September 23, 2013 Industry 13491
DiaSorin December 4, 2018 Health 6617
Enel * June 1, 2009 Public Services 72654
Eni * June 1, 2009 Oil and Gas 50702
Exor December 12, 2016 Finance 17152
Ferrari January 4, 2016 Automobiles 29282
Fiat Chrysler October 12, 2014 Automobiles 21203
FinecoBank April 1, 2016 Bank 6669
Generali * June 1, 2009 Insurance 29516
Hera March 18, 2019 Public services 6018
Interpump Group June 22, 2020 Industry  
Intesa Sanpaolo * June 1, 2009 Banks 41939
Inwit June 22, 2020 Telecommunications  
Italgas November 7, 2016 Public services 4582
Leonardo * June 1, 2009 Industry 6.19
Mediobanca * June 1, 2009 Bank 8924
Moncler March 27, 2014 Fashion 10503
Nexi June 24, 2019 Industry 7320
Pirelli December 18, 2017 Automobiles 5198
Italian post 21 December 2015 Insurance 13611
Prysmian * June 1, 2009 Industry 5890
Recordati June 20, 2016 Health 7984
Saipem * June 1, 2009 Oil and Gas 4332
Snam * June 1, 2009 Public services 15946
STMicroelectronics * June 1, 2009 Technology 22191
Telecom Italia * June 1, 2009 Telecommunications 8655
Tenaris * June 1, 2009 Raw material 12030
Terna * June 1, 2009 Public services 12026
Unicredit * June 1, 2009 Bank 30263
Unipol September 21, 2015 Insurance 3857

Source: Wikipedia

Instead of Googling indexftse:ftsemib or indexbit:ftsemib to find information on this index, you can find a breakdown of it right here:

As we can deduce from the table above, the sectors most represented in the index are the banking sector, the industrial sector and the public services sector, with 6 FTSE MIB shares per sector.

The most capitalized company is Enel, with 77.3 billion euros (as of 18 February 2021) and a gap of more than 20 billion from the second in the ranking: Eni, with 69.88 billion euros.

It is also important to mention that in addition to the FTSE MIB Index, the Milan Stock Exchange includes other secondary indices. To avoid misunderstandings with the main index, we list them below:

  • FTSE MIB Dividend - This index represents all the ordinary dividends that have been announced and paid by all the companies that are part of the main index.
  • FTSE MIB All Shares - This index groups the companies that are part of the main FTSE MIB Index and two smaller indices the FTSE MIB small-cap and the FTSE MIB mid-cap.
  • FTSE MIB Small Cap - This index reports the performance of the shares of all companies that are not part of the FTSE MIB and the FTSE MIB mid-cap after applying the values ​​of the capitalization schemes.
  • FTSE MIB Mid Cap - This index includes the top 60 stocks that are not within the FTSE MIB Index based on company capitalization.
  • FTSE MIB Star - This index includes all stocks of companies in the STAR sector, i.e. medium-sized companies with a capitalization between 40 million and 1 billion euros.
  • FTSE MIB Aim Italia - This index includes all the shares of companies operating in the AIM market, the alternative capital market.
  • FTSE MIB Implied Volatility Index (IVI) - This is a volatility index that measures the interpolated 180, 90, 60 and 30 day annualized implied volatility of the FTSE MIB Index based on the index's option prices.
  • FTSE MIB total return index

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FTSE MIB - How it is calculated

Stock indices are the synthesis of the value of the basket of equities they represent. The movements of the index are a good approximation of the variation over time in the value of the securities included in the portfolio. There are different methods for calculating indices, depending on the weighting that is attributed to the shares in the basket. We can therefore distinguish between:

  • Equally weighted indices: these are characterized by the equality of the weighting factors for all the securities that make up the index. The capitalization of the companies included does not matter, because all the stocks in the index have the same weight;
  • Price weighted indices: in this case, the weight associated with each security varies according to its price (if the price of a security increases more than the others, its weight within the index automatically increases). They are very simple to calculate as they are given by the simple sum of the prices of the securities that make up the index.

These indices, however, have the disadvantage of not correctly reflecting the performance of the entire portfolio: in fact, the most "expensive" stocks are represented more, regardless of the number of shares present and the size of the company;

  • Value weighted indices: These solve the problems of the previous ones as the weight of each stock is proportional to its market capitalization. Unlike other calculation methods, in this case, the indices are adjusted and adjusted following corporate transactions such as splits, groupings, payment of extraordinary dividends, demergers, free assignments or new paid issues.

Most of the main world indices are therefore calculated using the value-weighted method; these include:

  • S&P 500
  • Nyse Composite indices
  • FTSE100 (UK)
  • CAC40 (France)
  • DAX30 (Germany)
  • Topix (Japan)

Among the few remaining price-weighted indices, the two most important are the Dow Jones (USA), the oldest stock market index in history and the Nikkei 225 (Japan).

Equity indices can also be classified according to the industrial sector to which the securities in the portfolio refer (for example the sector Stoxx indices) or to the geographical area to which they belong (for example MSCI indices)

Almost all the indices are calculated based on the pure market price (price indexes). This system, however, partially distorts reality, as the entire remuneration that companies give to their shareholders is not considered, but only that granted as capital gain.

Dividends, in fact, are not taken into account and on the ex-dividend day the shares undergo nominal depreciation which, in theory, should be equal to the dividend paid. And an index based only on stock market prices still records a decline, the greater the more generous the dividend is. In this way, an event that is welcomed by investors appears to be negative.

There are several indices calculated on the Italian market.

FTSE MIB INDEX: This is recalculated every minute during the continuous trading phase based on the prices of the last contracts concluded on each share making up the basket. The FTSE MIB is a price index, therefore, it doesn't take into account the FTSE MIB index constituents weightings and it doesn't take into account the detachment of dividends or any periodic fruits paid by the companies that make it up.

The algorithm for the calculation is given by the Laspeyres formula. The FTSE MIB index methodology is as follows:

p (i, 0) and q (i, 0) are the base price and the base quantity in circulation of the i-th security;

p (i, t) is the price of the i-th security on day t;

I (t) is the value of the index at time t;

n is the number of shares making up the index.

At the end of the session, it is also calculated in the total return version, taking into account the effect of the reinvestment of the dividends of the companies represented in it; in this case, it is marked with the suffix "TR"

ftse mib calculation formula

(Source: Borsa Italiana)

Technical analysis of the FTSE MIB

Let's start with a monthly technical analysis of the price of the FTSE MIB index: the evolution of the prices of the main Italian index was placed in a very wide range, between 15,000 points, as a support zone, and 24,000 points, as a resistance.

As prices approached the support level, we saw significant accumulations of buyers' money, while as prices approached the resistance level, we saw paper accumulations (sellers' money).

This means that the aforementioned range has been increasingly respected and left for the long term as a key level.

As long as prices remain in that range and with this laterality, we cannot speak of continuity of the trend or of a change in it. Therefore, the movement of the range will continue to be a fact, at least until it breaks one of the technical limits of the mentioned interval. Have a look at this FTSE MIB index live chart:

FTSE mib chart monthly

Source: Investing, FTSE MIB index chart Monthly from 2009 to today, December 9, 2020. Please note: past performance is not a reliable indicator of future results

Throughout 2020 the evolution of its main companies was very volatile. Like most sectors, the Covid-19 situation has had a strong impact.

Let's see an analysis of some FTSE MIB stocks:

✔️ENI

In the oil sector, whose weakness was reflected in 2020 and incurred a lot of damage. Once the range of 12.25 euros per share was lost, prices maintained the downward trend without being able to recover positions in the medium term. The arrival and distribution of the vaccine could be something very favourable compared to the evolution of its prices.

✔️ UNICREDIT

Like the entire banking and financial sector in Europe, the Italian financial sector has also suffered from the effects of COVID and its direct and indirect repercussions. It was unable to recover positions or part of its assets due to the low-interest rates imposed by the European Central Bank.

Without rate hikes or fiscal stimulus measures and without a vaccine, it’s not possible to see a recovery in prices in the sector and in the companies that belong to it.

✔️ ENEL

A positive trend, so far, in 2020 for an entity that has experienced strong volatility. Results from the last quarter indicate that stock prices have managed to break out of resistance levels and stabilize at levels close to near-term resistance, but we continue to see an accumulation of paper (seller's money) as we get closer to this level.

✔️ GENERAL

Again, a company hard hit by the effects of Covid-19 which has very high volatility indices. For the moment, prices seem to be trying to overcome medium-term resistance but have not managed to recover the levels of the beginning of the year and much weakness remains.

In principle, we are witnessing a recovery in the sector due to collateral benefits, but there is still a long way to go to be able to speak of a positive scenario.

✔️ FIAT CHRYSLER

Another company that managed to achieve positive profitability in 2020, despite all the weakness of the economy and the damage this has caused to this type of industry. Prices have managed to break through significant levels of resistance but have failed to consolidate it for the time being.

In fundamental terms, its latest results reflect strength in the short and medium-term, so if it manages to recover and consolidate levels, we could speak of a very different scenario from the current one.

ftse mib chart

Source: Investing, FTSE MIB index weekly chart from February 2020 to today, December 9, 2020. Please note: past performance is not a reliable indicator of future results

As in most companies, we are talking about a sharp increase after the price cut due to the arrival of Covid-19. We have seen how business results have grown over the quarters and that the price evolution of the index, as well as that of most of its major companies, has overcome significant resistance levels in the medium and long term.

The indicators reflect a strength that has not been seen for several months and this sheds light on the possible favourable medium-term evolution.

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