ECONOMY

A double reading of the sudden resurrection of the Athens bourse

There is a classic mechanism of investor confidence that usually moves capital markets: At the beginning of the upswing, the dominant feeling is that of skepticism; nobody really believes that a market or markets can really go on rising. If this materializes, the dominant feeling gives way to certainty that the upswing (of markets or individual shares) will continue. It is this alternation of skepticism and certainty that sets the markets in motion, and, obviously, great success is when someone is able to be ahead of the turning point in prices. Now that the Athens Stock Exchange (ASE) is at its year-high, investor confidence has picked up and the question on everyone’s lips is whether the trend will continue. Of course, the steep rise creates the most sensation, as recent impressions are the strongest, and concerns the bourse’s rise since March, when the market was at the year’s low. In general, there are two theories that may explain this rise: The first claims that after a long downturn, an upturn is natural, indeed, given that other European bourses are moving in the same direction. Moreover, there are a number of listed firms that have shown positive signs of restructuring and it would be reasonable to suppose that the worst is over and that now it’s time for good news. The second theory is more conspiratorial: The government wishes to show in practice that the economy’s image is improving, as uncertainty is melting away. The government also urgently needs resources to reduce public debt and boost revenues through the improved results of public enterprises. All this can only be achieved simultaneously through a bull market. Perhaps the truth lies somewhere in between the two theories. The juncture is favorable and the government is pleased to see the bourse – and the shares of public enterprises in particular – picking up. Indeed, it can theoretically speed up the trend with business deals with large public concerns. But whatever explanation we accept, the basic question remains: Will the bourse continue to rise? The answer cannot be definitive if it is to be sincere. It is reasonable to expect a mild correction in the days ahead that will facilitate the restructuring of portfolios, but then again reason is not always the safest guide to stock markets. It is also worth a reminder that 70 percent of the value of shares traded on the Athens bourse belong to domestic investors and the rest to investors based abroad. The proportion of domestic investors has been on a decline recently, as they have been selling. The ASE’s immediate prospects depend on many factors, but mainly on the climate in foreign markets. Most bourses have been in an upbeat mood recently and analysts are noting that bonds are expensive and shares cheap. Stockbrokers also report that the upswing was started by foreign institutionals with domestic ones following. The exciting run continued this week and the general index remained above 1,950 points, despite a 0.23 percent drop yesterday.