Investors Pour Money Into Milan Market

DESPITE Italy's unsettled political and economic situation, the nation's stock market is bullish.

Since the beginning of the year there has been a 40 percent rise in the Milan stock market's value, after depressed levels in 1992.

``The economy now is probably at the low point, and looking ahead, it should be going up,'' says Stefano Micossi, director of research for the Confindustria employer's federation. ``So both Italians and foreigners are pouring money into the stock market.''

Still, this surge of money is purely speculative, Mr. Micossi adds, ``and at the first sign of difficulty everyone will quit.''

The governments of Guiliano Amato and Prime Minister Carlo Azeglio Ciampi have restored investor confidence, through efforts to cut the government's budget deficits and serious talk about privatizing the country's vast quasi-governmental sector. With Germany talking of reducing interest rates, the Italians should be able to cut their own.

``Some things are clearly improving dramatically,'' Micossi says.

Inflation is at 4.4 percent and could easily be below 4 percent in the coming year, he notes. Exports have been growing by 10 percent and Italy should finish the year with a trade surplus.

The downside is that economic recovery has not come to Italy. Production is low. Unemployment is high. Confindustria predicts 12.3 percent jobless by year-end.

In the meantime, Milan's profile remains modest.

``The Milan stock market has traditionally been behind other markets,'' a Western diplomat says. ``It's still weak and struggling, really, to establish itself.''

Still, adds the diplomat, there is longterm promise. Up to now, investors have been conservative, preferring state-issued bonds offering returns of about 10 percent. But as business retools to emerge from the corruption scandal, Milan could emerge stronger.