Greece stock market nosedives after five-week shutdown

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Exchange in Athens falls 23% in value in early trading with banks and financial shares hurt by up to 30% after enforced closure

 

 

Reuters

 

Monday 3 August 2015 10.31 BST

 

 

 

 

Greece’s stock market plunged nearly 23% on Monday when it reopened after a five-week shutdown brought on by fears that the country was about to be dumped from the eurozone.

 

The main Athens stock index fell to in worst ever one-day performance after only a few minutes of trading.

 

Banking shares, which make up about 20% of the index, were particularly hard hit. National Bank of Greece, the country’s largest commercial bank, was down 30%, the daily volatility limit. The overall banking index was also down to its 30% limit.

 

The nearest blue-chip futures contract expiring in August traded down 20.5%, adding to losses of 15.2% at the open.

 

“Most of the selling pressure is seen in bank shares, where there is about €100m [£70m...$109.6M] worth of unexecuted selling orders,” said investment adviser Theodore Mouratidis.

 

“There may be some more slide in store for [Tuesday] unless buyers emerge later in the session.”

 

Trading on the Athens exchange was suspended in late June as part of capital controls imposed to stem a debilitating outflow of euros that threatened to collapse Greece’s banks and send the indebted country out of the eurozone.

 

Since then, Athens has agreed a framework bailout plan with its European Union partners in exchange for stringent reforms and budget austerity. But implementation of the deal is some way off, keeping alive concerns about political and economic stability. There is also concern that the prime minister, Alexis Tsipras, may need to call a snap election.

 

The Athens General Index has fluctuated sharply in a year in which Tsipras’s Syriza-led government has wrangled bitterly with EU, the European Central Bank and International Monetary Fund lenders over a third bailout.

 

Traders had been expecting losses on Monday for a number of reasons. Negotiations on a new bailout might bog down, for example, leaving the government and banks perilously short of cash.

 

A report on Sunday in Avgi newspaper, which is close to Syriza, said the government was seeking €24bn ($26.3B) in a first tranche of bailout aid from international lenders in August.

 

Of this, the newspaper said, €10bn was earmarked for an initial recapitalisation of Greek banks, €7.16bn ($7.85B) to repay an emergency bridge loan and €3.2bn ($3.5B) to repay Greek bonds held by the European Central Bank and others.

 

The European commission, however, believes an agreement in August is unlikely and that a new bridge loan will be needed.

 

This all puts Greek bank shares in the spotlight. Recapitalisation, both long- and short-term, waters down the value of existing shares. The banks are also not making profits this year and have lots of bad loans.

 

Similarly, Greeks themselves are being severely restricted. To limit the possibility of using shares as part of euro-flight, the government and ECB have said no extra money can be withdrawn by Greeks from deposit accounts to buy shares.

 

A Greek regulatory source also said the government would extend a ban on stock selling when it expires later on Monday.

 

Greece’s dismal economic prospects may also affect the market. The European commission says the Greek economy will shrink by 2% to 4% this year, a return to the recession that plagued the country for six years until 2014.

 

On Monday, a survey showed Greek manufacturing activity plunged to a record low as new orders plummeted and the three-week bank shutdown caused serious supply problems.

 

 

The Athens stock exchange. Bank shares were particularly hard hit on Monday after reopening following the five-week shutdown.

Photograph: Yannis Kolesidis/EPA

 

 

http://www.theguardian.com/business/2015/aug/03/greece-stock-market-nosedives-reopening

 

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