New Catalysts Are Needed to Keep the Upward Momentum of the Athens Stock Exchange

According to Merit CHAEPEF new catalysts are needed for the Athens Stock Exchange in order to maintain the upward momentum which lead the General Index with profits of 17.27% for July while for the FTSE 20 the profits was 22.54%. The first meetings in August in the Greek stock market indicate that there is still margin for further increase of the stocks price. Three are reasons which lead to this. First of all at the macro level, the market valued positively favorable comments from the Troika regarding the efforts in order to reduce the deficit and the confidence to release the second tranche of the loan.

Furthermore, the banking sector was the engine which moved upwards the General Index driven mainly by the strong mobility which was observed (particular after the middle of the month) as the formal proposal of Piraeus Bank and the successful outcome of stress tests for all private Greek banks.

This becomes more clear if we consider that the banking index alone recorded profits of 35.34 % for the month of July, while highly impressive is the performance of some individual assets such as TT (84.23%), EUROBANK (60.32%), Piraeus Bank [BOPr.AT] ( 45.27 %) Alpha Bank [ACBr.AT] ( 44.3 %) and PROTON Bank (40.8%).

The intense speculation about deals in the Greek banking industry has led many international institutional portfolios to return and invest to the Greek market. A third factor was the extremely low levels that the stock market reached last month as the General Index reached below 1400 units during the session on 8 / 6. The last time the General Index was at that point was back at February 1998! Therefore, many shares were extremely undervalued despite the fact of profitability, leading the P / E index of the stock market to single-digit levels.

However, in order to convert this mid term channel to a long term one requires the existence of new catalysts other than the aforementioned. A very important technical point is the 1785 units, which can give impetus to the 2000 units. The last time the General Index of the Greek Stock Market was over 2000 units was back in April.

The catalysts could lead to the maintenance of growth may still be summarized in three. The first has to do with the macroeconomic environment of Greece. In addition to deficit reduction, the Greek government has to face a recession and stagflation environment as the retail sales and the income from tourism is reducing. The third tranche of the loan would depend on whether the government will catch the targets for tax revenues while the Troika pushes further for deregulation of the professions and of the energy sector while at the same time asks for interventions in public utilities.
Another catalyst could be the fulfillment of the expectations created for deals between banks which will lead to the consolidation of the industry.

Finally, corporate results which are expected mainly in the second half of August can give new impetus to the market (short term) as long as there are positive surprises, although some sectors are severely affected by the prolonged recession of the Greek economy.