Galery

1

Market movement has inicated that sharp increases in some sessions during the past 15 days are due to purely speculative actions, whereas most stock analysts have noted the sky-high sales in lamost all shares, complying to the gloomiest scenarios for the Greek economy, banking system and corporate profits.

At levels lower than 1.300 points some orders for purchases of large institutional investor portfolios were activated, rather automatically. However, liquidity returned to cover the entire fund-board spectrum, as the recovery of Greek economy will be an even more prolonged and obstacled process than expected.

Scenario

As emphasized, Greece’s formal bankruptcy and abandoning the Euro were not entirely mirrored in today’s stock assessment. Following recent statements by Obama and Merkel, clearly indicating the European Union’s and the United States’ reluctance to witness a member state go bankrupt, this outcome for Greece is seen as least possible. If, however, Greece is thought to have hit the market bottom, predicting the growth margins of the Main index is a daunting task, at least until the end of this year, given the raising insecurity in market determining factors.

Initially, the Midterm Plan must be adopted and improvement of fiscal indicators, reform progress and the speed of privatization projects should follow. Only if government “promises” turn to reality, the Athens stock exchange will be able to offer foreign investors a return of 25% to 45%, or an increase in the Main index to 1.600 – 1.800 points.

To raise market levels, it suffices to move towards much needed stabilizing of the banking sector through increased liquidity, which would mean bank mergers and boost in equity. Some analysts believe the latter to be quite challenging and ineffective in the long term, given the insufficient liquidity.

Besides banks, certain strategic privatizations may provide tailwind for the market through not only reducing debt, but also contributing to the economic recovery of Greece. Shrinking of internal demand has put survival of numerous small and medium enterprises at stake, while the “big” ones will undoubtedly seek superiority upon recovery from the crisis. Hence, other business sectors are to welcome some key contracts and deals as well.

The “specialists’” opinion on Athens stock exchange’s future

Greek capital market is currently a reflection of the increasing uncertainty in the strength of the local financial system. The vagueness in the voting schedule for the Midterm plan, tied to insecurity in the immediate future, are sure to increase pressure on the stock exchange.

Belta Securities negotiation leader, Takis Zamanis, claims that “most institutional investor portfolios exit through selling, anxious about the political instability in the country.

Despite Europe and USA’s eagerness to reach a solution of the Greek problem, the country seems to be unwilling or unable to fight social pressure and undertake adequate measures.”

Dimitris Saris, ΑΧΕΠΕΥ’s stock agent, adds: “besides political swings, much dreaded is the effect of the new measures on the already negative economic climate, on the general level of internal demand, on the business and, in the future, on quotation indicators.”

The investment consultant of Proton Bank, Dimitris Dzanas, follows a similar line of thought, underlining that “the Athens stock exchange is now covering for the political time that the government may need, but not for the markets and probably not even the country. Markets see time as productivity.” Despite government’s last-year “success” in reducing the deficit, fiscal data for the current year do not indicate a continuing trend, suggesting that the country will hardly be able to shrink its debt. A notion that was further confirmed by the latest reduction in the state’s credit rating by Moody’s international agency, who despite foreseeing a second aid package, does not seem convinced in successful fiscal recovery.

Meanwhile, Teodoros Krindas, CEO of Attica Wealth Management, said further that Greek market is strangled by the fact that “market participants are almost exclusively short-term investors with “short-sighted” investment strategy. For the Athens stock exchange to be given a new direction, the market needs to attract long-term investments.”

For this to happen, there needs to exist a clear perspective on the future, which is to indicate that current share prices are in fact low, in view of the next 2 to 3 years’ outlook. 

Besides help redeeming part of the debt, privatization may boost the market through signaling that the country is going through changes. Teodoros Krindas emphasizes that investment should focus on infrastructure and energy resources, “which are a good source of fresh capital for the treasury, and in the same time will provide new workplaces, moving Greece a step further in its way to recovery.

Since the government investment program has been cut short, depriving us of our national resources, we must seek foreign capital.”

Banks

A substantial climate change cannot be expected if a healthy banking system is absent. During the previous year the situation was relaxed, with banks taking short-term loans from the interbank market, and letting long-term loans to households and companies. However, when banks could no longer rely on the interbank system, and became more and more dependent on the ECB and government aid, the local system began suffering liquidity starvation.

“In order for the Greek financial sector to survive the constantly increasing non-performing loans, banks need to substantially increase equity, or move towards… merger,” believes Takis Zamanis.

Internal transactions do not seem to be enough to change the general view of the banking sector significantly, unless some powerful Greek projects take part. And vice versa- a powerful foreign bank team in some of the leading Greek banks would be much more welcomed. As for the stock board, Merit Securities Analyst Nikos Hristodoulou, assesses bank shares to continue fluctuating during the entire month, not excluding a possible return to their lower levels. He stresses that banks may have a positive role, be it in the short term, only if the “haircut” scenario for the Greek bonds is pushed at leas 2 or 3 years further.

“Selected” shares in institutional investors’ portfolios

Shares of companies involved in major roadshows, organized by ΕΧΑΕ in New York and London, are those that primarily attract the interest of foreign, but also Greek investors, along with those located in the privatization "package".

Some large and mid-cap companies, based on their foreign affinity and future development prospects, further complete the list of “selected” shares. Naturally, in the foreground lies the banking sector, which despite absorbing most of the pressure, continues to be the main target of foreign investors, though in the past year and a half speculative hedge funds seem to be the only ones showing interest.

The stock environment hosts most of the scenarios for bank mergers, although these are procedures dispersed with difficulties.

The most popular one – about the merger between the National Bank of Greece and Alpha Bank seems to be fading, following the collapse of recent negotiations between the two managements. This does not, however, exclude a future merger, given the circumstances change.

The second scenario, which analysts believe more likely, is a deal between the National Bank of Greece, Eurobank and the Saving Bank, which is to create a powerful Greek financial-credit group which will be able to present the interbank market with considerably stronger profile. Others favour the possible merger between Eurobank and Alpha Bank, so they can work towards economies and avoid new increase in equity, in light of the reduced liquidity in Greece, and internationally.

Such an action may be accelerated by the accomplishment of another scenario, according to which Citigroup has shown interest in the National Bank of Greece…

In Piraeus Bank, foreign investment interest is currently focused on the purchase of substantial percentage of equity, since the Czech PPF Group (owned by billionaire Petr Kelner) and ICT Group (owned by the Russian Aleksander Nesis) have already acquired 11% of the bank’s equity.

Besides large Greek banking groups, activity has been detected with firm securities, included in the privatization program of 2013. Ports, water supply companies, the National Electrical Company and OPAP are most attractive to foreign investors, showing strong indications and room for profits even in time of crisis.

Reactions

Strong political reactions have been expresses regarding the above-mentioned privatizations (even by cabinet members) and by those employed in the companies. Government banking institutions (the Saving Bank and the Agricultural Bank) are also being monitored by foreign investors, but have been involved in various merger plans as well, which are likely to be prolonged in time. The telecommunications company presents good opportunity after the Greek state sold 10% to Deutsche Telekom with another 6% soon to follow.

Among the rest of the shares traded in the Athens stock exchange, refineries (Greek Petrol, Motor Oil) are of interest due to their strong positions in circumstances of crisis, achieved through the substantial investment they received during the past years, together with the energy sector in general (electrical energy production, natural gas, fuel trade).

Present in foreign portfolios are companies with strong foreign outlook and considerable foreign presence, such as Coca-Cola 3E, Elactor, Mitilineos (Metka), Follie Follie Group, Viohalko, Intralot, Sideron and Titan.