ECONOMY

The ASE needs foreign institutionals’ money

Investors have been seeing the Athens Stock Exchange fall for so long now, that the last 10 days have come as a shock. Now that most of them have become comfortable with the idea that investing their money in the stock market was a mistake or that they had fallen victim to some crooks, everything started to change. Stocks, especially blue chips, began a rally that reminded some of the good old times of 1999. The latest ASE rally is the result of an important development, the announcement of the merger between National and Alpha banks. This move can be seen as the first of several similar mergers, given the fact that both the government and many businessmen agree that restructuring and mergers are the way forward. It is true that the stock market is thrilled by surprise moves that are seen as creating further opportunities. This is a healthy reaction. What is problematic is that real events have been augmented by rumors. In the past few days, all sorts of rumors abounded, and were discounted. All plausible merger scenarios were heard, including the least plausible. Great business moves are what drive the stock market. However, this market cannot be based on rumors. This is unhealthy. These days, the best thing an investor can do is not just effective management of his or her portfolio, but to avoid the pitfalls created by wild rumors. What the ASE needs most is to become more international, that is, to attract foreign investors who will find that there are opportunities, even if only short-term ones. The domestic investor market is necessary, but not enough to ensure a sustainable rise. Soon enough, this market will disintegrate into an illogical game where the rumors mostly concern the merger of two problem-ridden and already overvalued shares into a supposedly healthy and profitable colossus. In fact, foreign investors did not appear impressed by our market during these bullish 10 days. At most, they are friendly neutrals, moving on the margins. They do not seem in a hurry and they are definitely not affected by the unrealistic expectations plaguing retail investors. The ASE needs more professional money. This will mainly come through foreign institutionals. Something that might attract them would be the upgrading of the Greek economy, that is, its heavier weighting in international indexes. If there are decisions to this effect in the coming days, we can hope for a rise in foreign interest. If not, there will be no excuse for those who follow such experts. In the next few weeks, we will see important business developments and initiatives affecting capital markets. Investors must remember, though, that not all shares will rise. Some, despite the considerable battering they have taken during the past couple of years, are still overvalued. The 1999 rally contained a lot of unusual phenomena that cannot serve as our guide to the future.