Markets reviewing political risk in Greece
Following Tempe train crash, markets are pricing in the new situation ahead of elections
The political risk has returned to the Greek “equation” as, following the railway tragedy at Tempe, investors are opting for a comprehensive review of conditions that determine political correlations ahead of the upcoming elections.
Uncertainty over Greece has returned, and it concerns both the timing of the elections and how these latest developments may affect the results at the ballot box. This is how domestic analysts explain the sharp plunge of 2.92% recorded on the Athens Stock Exchange on Monday, while Greek bonds, though still showing resilience – due to the fact that a large share of them are in the European Central Bank’s portfolio – “received” warnings from international analysts that their recent outperformance is exaggerated, also due to the political scene.
Until recently, one of the strong catalysts behind the impressive performance of Greek stocks and bonds was the absence of political risk, with Athinon Avenue recording the biggest gains internationally and the spread of Greek bonds having recorded the biggest decline in the eurozone since the start of the ECB’s tightening cycle in July 2022; in recent days, though, market pricing has changed.
This shift does not mean that there is a fear of the next government not continuing the course of reforms. It simply reflects the fact that investors currently see a murky landscape politically, and prefer to step aside and take a wait-and-see attitude until there is greater visibility.
Dennis Shen, chief analyst at Scope Ratings, tells Kathimerini that “the upcoming elections are likely to cause uncertainties about Greece’s economic policies and institutional relations in the long term – therefore it may lead the markets to reprice the risk for the country’s prospects.”
Likewise, Aman Bansal, a Citigroup analyst, warns that “the wiretapping scandal and the recent tragedy at Tempe may turn public opinion more against” Prime Minister Kyriakos Mitsotakis, though his “remaining in power could be the most market-friendly scenario.”
