STMicroelectronics NV, Europe's biggest semiconductor maker, will probably join Italy's benchmark index next year, spurring fund managers who track the Mib30 to buy shares, investors and traders said.
ST will be added when the index is recalculated next March because of changes in exchange rules, traders said. The company, with a market value of 31.9 billion euros (US$29 billion), may get the sixth-highest weighting in the index, they said.
Currently, the Italian index is dominated by banks, insurers, Telecom Italia SpA and companies linked to the nation's dominant telephone company. ST, based in Geneva and registered in Holland, has been left out of the index because of its foreign status. Yet the stock is one of the most traded in Italy.
"This will give the Mib30 its first true technology stock," said Manlio Bonafede, who helps manage 1 billion euros at Banca Leonardo SGR and holds ST shares. "As the [chip] industry is set to recover, this could pull the index higher in the future."
Borsa Italiana SpA, which runs the nation's stock market, last month said companies registered outside Italy will be included in the Mib30 for the first time from Jan. 1. Consob, the nation's market regulator, may approve the changes on Monday.
On average this year, ST shares worth 146 million euros changed hands in Milan each day, compared with 250 million euros for Eni SpA, Europe's No. 4 oil company, and 310 million euros for Telecom Italia Mobile SpA, Italy's biggest cellphone company.
ST will probably replace Saipem SpA in the index, traders said. Europe's biggest oil-services company, which is controlled by Eni, is currently the lowest-rated in the Mib30 and shares worth 7.9 million euros change hands on average a day.
"ST deserves to join the index as the value of shares traded rivals Eni and TIM," the two highest-rated stocks on the Mib30, said Edoardo Mosca, a trader at Nuovi Investimenti in Biella. "There are too many banks and insurers."
ST was formed in 1987 from the merger of Italy's SGS Microelettronica and Thomson Semiconducteurs of France. In May 1998, the name changed to STMicroelectronics from SGS-Thomson Microelectronics. The stock, which is included in France's benchmark CAC40 Index and has traded in New York since December 1994, has been listed in Italy since June 1998.
Finmeccanica SpA, Italy's state-controlled defense and aerospace company, owns 21.8 percent of ST. France Telecom SA has a 10.7 percent stake, and Areva SA, France's state-owned nuclear agency, has 11.1 percent. The rest is held by the public.
The revision of the Mib30 might be brought forward if there is an initial public offering of a company whose market value is more than 3 percent of all stocks on the Italian exchange, currently about 600 billion euros. Borsa Italiana's rules also say the amendment would be anticipated if a Mib30 company spun off a unit that itself qualified for inclusion in the index.
Other foreign-registered companies that trade on the Borsa Italiana are Bayer AG, Banco Bilbao Vizcaya Argentaria SA, Banco Santander Central Hispano SA and Volkswagen AG. Still, too few shares of these companies trade in Italy for them to qualify for the Mib30 or the Midex Index of 25 medium-sized companies.
Membership of Italian indexes is based on a combination of market capitalization and the number of shares traded. They are normally revised twice a year, in March and September.
Some investors said they were concerned about the Italian Exchange including in its indexes foreign companies or those with a large amount of foreign holders.
"The problem is to make sure an Italian index doesn't become an international index," said Andrea Pasetti, who helps manage Italian stocks worth 650 million euros at Capitalgest SpA in Brescia. "Having an Italian company as a big shareholder in ST will make it easier, though we need to see if other stocks will be added as well."
So far this year, the average number of ST shares traded in Paris each day has been 51 percent higher than in Milan. So far this month, 4.6 percent more shares have changed hands in Italy.
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