Bank stocks proved to be the negative surprise of the year 2001 on the Athens Stock Exchange. Despite the hugely important merger between the country’s top two banks, National Bank of Greece and Alpha Bank, the prices of bank stocks suffered a rout. The bank stocks sub-index fell 34.73 percent during 2001, while the general index fell 23.81 percent. Only holding and investment firms did worse. This crash of banks’ share prices went against the tradition of high-capitalization stocks as relatively stable and without the extreme swings of small- and medium-size firms. Indeed, the FTSE/ASE Mid-40 index of medium-capitalization stocks lost 29.63 percent in 2001, while supposedly all-powerful stocks, such as Alpha Bank or National Bank, fell 44.88 percent and 33.70 percent respectively. The crash of banks’ share prices happened after the much-heralded «upgrade» of the ASE into one of the world’s mature markets, last May 31. This upgrade resulted in the complete liquidation of the not insignificant positions of foreign funds specializing in emerging markets. These were not replaced by the mature market funds. The highly advertised inflow of such funds simply never happened. Domestic investors could not compensate for the lack of foreign investment and this led to the precipitous decline of bank shares which had mostly attracted foreigners. Even a limited recovery during the last couple of months, spurred by the announcement of the National-Alpha merger, did not prevent the banking sector from being hit hard. Among the 16 listed bank shares, 10 suffered losses exceeding 30 percent. The loss champion was the National Investment Bank for Industrial Development (NIBID), a National Bank subsidiary, whose stock dropped 57.6 percent during 2001. Following in second place was the National Industrial Development Bank (ETBA), with losses of 47.6 percent. The best performer was Bank of Greece, which only lost 0.48 percent over the year. It was followed by the Bank of Attica, which lost 4.69 percent. All other banks sustained considerable losses. EFG Eurobank Ergasias, whose stock declined 26.74 percent, was the sector’s third-best performer. Commercial Bank of Greece was close, dropping 27.03 percent. Given their relative weight, the banks’ performance had a heavy impact on ASE investors’ morale, resulting in a further downward spiral. What saved the market from an even worse year was heavyweight OTE telecom, the heaviest-capitalized stock, which accounts for slightly less than 10 percent of total capitalization. OTE’s share rose more than 10 percent in 2001, strongly affecting the ASE general index. Banks were not the only sector that had an especially bad year. Investment, technology and publishing firms also suffered heavy losses. Investment firms ended the year down 42.67 percent, almost double the general index’s losses. They were still paying for the overheating of the market in 1999. Their results took a dramatic downturn, with most of them registering big losses from their investments on the stock market. Information technology companies also presented a very negative picture. Shares of companies such as Altec and Info-Quest, which had been among the darlings of the investing public and whose success allowed the firms to entertain thoughts of great expansion, took a drubbing for the second year in a row. Altec lost 64.50 percent in 2001, while Info-Quest saw its share price drop 58.73 percent. Publishers’ stocks came under a great deal of pressure as well. The precipitous decline in advertising revenue, combined with the failure of most groups’ ambitious expansion plans, affected the companies’ results. Thus stocks such as Lymberis and Lambrakis Press are among the overall loss leaders. Metallurgical firms also had a bad year. The worst losses (54.51 percent) were suffered by metal packaging company Maillis, one of the most successful and outward-looking Greek firms. Other heavyweights, such as Aluminium of Greece, ETEM and Corinth Pipeworks, each lost over 20 percent. Only two metallurgical firms’ shares ended the year with gains, Alumil (25.70 percent) and Tzirakian (5.40 percent). Most food companies also lost ground during the year; however, six of them showed gains of over 10 percent, with one, KRE.KA., being the overall champion for 2001, with an incredible 245.43 percent rise. On the other hand, eight food firms lost over 20 percent. The top losers were Karamolengos 59.23 percent) and Evrofarma (54 percent). The one bright exception among the sectoral sub-indices was insurance. Insurance firms rose 30.50 percent. The main reason they bucked the trend was the takeover of Interamerican by Europe-wide insurance group Eureko. Eureko paid well over market value to acquire the totality of Interamerican’s shares. 10 Conversion of drachmas into euros?