The best thermometer of the financial climate in Italy nowadays are unit trusts, and September was a very hard month for them.

Net sales for the month collapsed to L11,100bn, almost half the August level. But, above all, equity unit trusts had redemptions of L2,300bn, from a positive figure in August (L500bn). The worst hit equity unit trusts were those specialised on the Italian stock exchange, amounting to L1,100bn.

On the other hand, money market trusts and Italian bond trusts have bounced back as the most popular products (net sales of L8,400bn altogether in September) - a clear sign that investors are now avoiding risk, preferring the safe haven of domestic bonds. Indeed, the new trend for private investors had been anticipated by the professional sector, as seen in the last available figures on security trading by unit trust managers. In August, the net balance between purchases and sales of Italian stocks had been negative (L-2,100bn) for the first time in12 months.

At the moment, Italian and foreign equities account for only 20% of the total assets of Italian unit trusts, while Italian bonds still represent more than 51% of these assets. It has been pointed out that Italian institutional investors, mainly unit trust managers, are demonstrating that they can't go against the trend and try to stabilisethe market, because they are becoming more and more concerned about 'benchmarks'.

In fact, according to new rules, they now have to tell clients which benchmark they are following (they didn't before) and so they risk being blamed if they underperform the benchmark by too great a margin.

Another sign of the new wave of Italian 'flight to quality', are the latest government bond auction sales, where prices went even higher and yields became the lowest ever, due to the heavy demand from both private and institutional investors. Maria Teresa Cometto

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