Present stock valuations remain attractive and current developments in the global economy and the world of business justify optimism regarding market prospects, says Anthony Broccardo, investment director of the F&C group. In an interview with Kathimerini, he recommends increased placements in emerging markets and maintenance of positions in the US and Europe; he believes the recent increase in foreign institutionals’ placements in the Greek stock market are of a strategic character, not merely conjunctural. Markets recovered in 2003, after a long downturn. Do developments in the real economy justify optimism, or is it more of a technical rebound based on psychology? Psychology is a basic component of markets. We should not overlook the fact that the downturn of recent years was the biggest since the 1929 crash and left a deep mark on investor psychology. The upturn can certainly be attributed to technical reasons to a degree, but the crucial factor that fed optimism was – and still is – the improvement in microeconomic and macroeconomic indicators. I believe that market performance in recent months reflects the positive developments in the global economy, particularly in the US. Markets have already recovered a large part of the lost ground in relation to the lows of last March. Is there a risk that share prices have risen faster than would be justified by the positive news coming out of the economies? I believe stock valuations remain at attractive levels and given the flow of positive news from the economies, there are margins for them to rise higher. If you look at the diagrams of the indices of the main stock markets, you will see that despite the upturn in 2003, we are still at the beginning of the recovery. We now have data that allow us to speak not only about an exit from the crisis but about strong growth. This prospect does not leave stock markets unaffected, particularly at the current low levels after the protracted fall of recent years. Nevertheless, the terrorist attack in Madrid jolted markets, creating anxiety and uncertainty. The Madrid attacks were a shock to all of us and naturally affected markets as well. The particularly large number of victims has spread a veil of sorrow everywhere in Europe and throughout the world. Such a big terrorist attack certainly creates concern and anxiety, which markets detest. Nevertheless, markets have unfortunately lived through similar situations before and have developed strong antibodies, which helps their system stabilize. I believe that in the past markets would have reacted in a much more volatile fashion to an attack such as the one in Madrid. Are you concerned that the fear of terrorist attacks in Europe will affect the real economy (tourism, transport, consumption)? This is a potential danger but it’s too early to calculate the actual dimensions of the problem. Present data and developments give me feelings of security and optimism rather than of insecurity and pessimism. Economies are recovering, there is increased liquidity, corporate profits are on the rise and developing economies are recording impressive growth rates. Terrorism is, unfortunately, causing concern and may have a negative impact in the short term on sectors such as tourism and transport, but I do not believe it can change the general trend, which is clearly positive. Lately, we are seeing a stronger presence of foreign institutionals in the Greek stock market. Is this due to a more general turn of funds toward secondary markets, or is it more of a strategic participation? The Greek bourse is in the category of mature stock markets but still presents certain characteristics which are mainly found in emerging markets. Interest by foreign institutionals is, indeed, becoming stronger and some funds may actually shift to what you called «a turn toward secondary markets.» Nevertheless, I estimate that the main bulk of funds placed with the Athens Stock Exchange is more of a strategic character, in the sense that Greece is by now an organic part of the EU and is treated as such by the majority of foreign portfolio managers. Additionally, a strong point of interest in the Greek market is the prospect of integration of the countries of Southeastern Europe into the EU, where Greece can play a leading role.