Managers keep faith with Italy ahead of PM Renzi's make-or-break referendum

European fund managers are continuing to hone in on Italy's 'cheap' equity market, despite the poor performance of the country's banking sector in the EU's recent stress tests and uncertainty surrounding a key referendum in October which could cause more political upheaval.

Stress tests carried out at the end of July found Italy's financial sector ranked among the weakest in Europe, despite the launch of a €4.3bn government-backed rescue fund earlier this year to bail out Italian lenders hit by a logjam of non-performing loans (NPLs). Italy's third largest bank, Banca Monte dei Paschi di Siena, was deemed the only financial institution in Europe at risk of suffering losses exceeding its entire capital base over the next three years, while Unicredit, UBI Banca, and Banco Popolare also produced poor results in the tests. In a bid to speed up the sector's r...