ECONOMY

The bourse keeps rising but is the rally sustainable?

The Athens Stock Exchange resumed its drive toward the 2,000-point mark yesterday by rising 2.38 percent to end at 1,954.96 points. A sustained rising trend, such as the one that began on April Fool’s Day this year, had not been seen since the market’s mad dash during the summer of 1999, which culminated at a record closing of 6,355.04 points on September 17. A temporary rise before the last national elections, in the spring of 2000, did not last as long. Is the market finally awakening from its long slumber? Experts believe so, although they have been burned too badly in the past not to add a note of caution. The market’s rise has coincided with a general improvement in markets worldwide. But there are internal reasons as well. In the recent past, especially in 2000, the falling Athens market had remained indifferent to rallies on foreign markets. Experts point to the great rise in bank stocks as an indicator of renewed expectations. Yesterday’s rally was, to a very large extent, driven by banks. Emporiki Bank rose 7.13 percent, National Bank of Greece 4.79 percent, Eurobank 4.49 percent, Piraeus Bank 3.43 percent and Alpha Bank 3 percent. Also yesterday, 60 shares reached year highs. It is not only the prospect of short-term gains that has encouraged investors to return to the market. The protracted fall in the market and the thin trading that resulted had canceled many business moves, as a cheap source of financing dried up. With the market rising again and turnover regularly breaking 200 million euros recently – it had a hard time reaching 100 million only a couple of months ago – businessmen can now once again consider investing and talks about mergers and acquisitions are beginning again. This can only benefit the economy. The greatest gainers, so far, are those investors who bet that the market would rise and bought options on the derivatives market. Those, for example, who acquired call options a month ago on the FTSE/ASE-20 index of blue chips have gained about 1,500 percent by yesterday. On the other hand, those who tried to «short» the market by betting that it would fall have had disastrous results. At this point, the rise in derivatives and the rise in shares seem to be feeding off each other, leading to worries that we might have another overheating. To market analysts, the most worrying indications are the large number of open contracts for National Bank shares which expire in September. Such high interest for such relatively long-term contracts is unprecedented. There are fears that investors may be had once again, as in the past. So far, however, and despite the rise in new accounts opening on the stock exchange, retail investors have played a rather small role in this latest rally. It is the institutionals, both foreign and domestic, who have driven the rally. Perhaps, this time, retail investors are a little short of cash, having sustained heavy losses in the previous three years. Or they may be skeptical. Market players, however, do not believe the last explanations. They say that investors’ memories tend to be surprisingly short.