Sustained ASE recovery uncertain as investors appear unconvinced

The Athens Stock Exchange (ASE) appears to have reversed its declining fortunes in the last two months, as the number of investors’ accounts being reactivated after a long period of inertia is rising by the day and the volume of trading has markedly improved. On the whole, however, investors remain rather hesitant, unconvinced that the recovery is based on long-term capital placements and not one more speculative jerk of the kind repeatedly witnessed in the last 45 months. A sustained recovery is seen as depending, on the one hand, on the willingness of foreign institutionals to rejuvenate the market’s blue chips, which have lagged behind medium- and small-caps, and, on the other, on the behavior of foreign bourses. Vassilis Vlastarakis, chief analyst at Contalexis Financial Services, believes that the global economy is facing a number of problems mainly resulting from the excessive productive capacity created in the 1990s, which, combined with the strong downturn in demand, gives rise to serious doubts as to the ability of the economy to recover. «Excessive borrowing by households is a serious obstacle, limiting consumers’ purchasing power. Rising rates of unemployment in Europe and the USA are also hampering the recovery of consumer spending,» he says. «Corporate profits are not projected to recover appreciably in 2003, due to the low potential of enterprises to raise their prices. The problem of credibility in financial statements continues to exist in Greece and abroad, undermining investors’ confidence. «Despite the first signs of recovery in the US economy, we would recommend that investors retain ample liquid assets and pay attention to the strong fundamentals, growth rates and dividends of enterprises when opting for selective placements. «It must be noted that bonds, on the other hand, are trading at historically high prices and must be avoided, particularly US government bonds. There is now the visible danger of rising interest rates in 2003, which will exercise strong downward pressure on bond prices. Investors should prefer bonds of short maturity and those of highly rated corporations which continue to offer high-risk premiums,» says Vlastarakis. According to Dimitris Tzanas of Omega Securities, telecoms, information technology, publishing, banks, foodstuffs, metallurgy and the merchant marine are the sectors from which should generate business news in the near future. The end of the uncertainty after the Iraq war is seen as a spur for many firms to start dusting off business plans and deals that had remained on the shelf for some time. The Olympic impact Analysts say that roughly one in four listed companies stands to benefit from the Olympic Games of 2004, as providers of infrastructure for the event and goods and services to the expected large number of visitors. These are mainly in the sectors of hotels, catering, foodstuffs, ferry operators, retailing, telecommunications and construction. The chairman of the Athens Chamber of Commerce and Industry, Drakoulis Fountoukakos, said recently that retailers have not yet realized any of the anticipated benefits from the Games. Fourteen months away from the event, it would be rather surprising if they had. Meanwhile, the market downturn has pinched many enterprises hard. A generally high debt load in the private sector and the feeble purchasing power of the Greek consumer have not allowed much of a recovery in profits; indeed, many retailers have registered high losses so far this year. The coastal shipping industry, which is planned to play a major role in hospitality and recreation areas for the Games, is weighted by high debt. Companies are currently in a phase of renegotiation with banks of the large loans obtained in the 1998-2001 period, when the big mergers and acquisitions took place and operators entered a race to acquire the biggest and fastest boats. ANEK Lines, which has teamed up with NEL and DANE in competition with Attica Enterprises and Strintzis Lines, has already rescheduled its debt with creditor banks. The hotel sector is faring rather better and faces excellent prospects in view of the Games. All listed firms are registering high profits, headed by Astir Palace in Vouliagmeni which posted a 223 percent profit growth in the first quarter, followed by Lampsa, which controls the recently refurbished Hotel Grande Bretagne, which has reported gains of 92.78 percent this year. Catering firms expect to benefit in August 2004, when the Games are scheduled, as it is traditionally one of the worst months for sales. Construction firms are already realizing the benefits of the huge project spree that has turned much of Attica into a mammoth building site. The sector features some of the champions on the stock market this year; Pantechniki’s share has rise 264.91 percent this year and Domiki Kritis, 85.28 percent.

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