Only way is up for securities
Bond and stock prices soar as polls bolster confidence of rating agencies and investors
The Greek bond and stock markets welcomed the election result with an impressive rally on Monday, due to the stronger prospects of a functional government in Greece, with a four-year horizon and a pro-investment and pro-reform agenda, also narrowing the gap with investment grade.
The Athens Stock Exchange recorded an explosive rise of 6%, while the yield on the Greek 10-year bond plunged 5% to a six-month low of 3.86%, widening the gap with Italian bonds (4.3%) and approaching the level of Portugal (3.3%) and Spain (3.5%).
Rating agencies and investment and brokerage firms welcomed the results. In a comment, Moody’s Senior Vice President Steffen Dyck emphasized that the outcome is positive for Greece’s credit rating, sending a clear message for an upgrade in the near future.
“The result significantly increases the possibility for another New Democracy term, indicating continuity in fiscal and economic policies, which is a credit positive for Greece,” he notes. For investment firms in general, the news will boost the outlook of Greek stocks and bonds. “These results are positive and will be supportive for the Athens Stock Exchange as market-friendly New Democracy is expected to secure a clean four-year term in the second round,” Wood & Co economists Raffaella Tenconi and Alessio Chiesa note. According to their estimates, Greece’s growth this year will reach 3.5%, and 4.2% in 2024, while debt to GDP will fall to 154% this year, from around 170% in 2022, and to 145% in 2024.
Growth of over 3% in 2023, thanks to higher investments, exports and the record tourist season, is also expected by Optima Bank, which confirms its positive attitude toward Greek shares and expects an acceleration in reforms by the new government. GDP growth, a drop in the public debt and an investment rate recovery will bolster Greek shares and help ATHEX return to the realm of developed markets.
Eurobank Equities also expects a significant rise in the valuations of Greek shares, given also their low prices at present.
