Despite some hiccups, high oil prices have done little to dent international investor sentiment for stocks at a time when ample liquidity continues to rule the markets. Greece is not an exception, since most of the daily turnover is due to buying and selling of stocks by foreign participants. However, unlike other European markets where the returns of small caps have outpaced the returns of large caps in the last few years, Greece’s major stock index has been propelled to new four-year highs, thanks to the help of some 20-30 companies, the majority being in the large cap category by Greek standards. Most of the medium and small stocks have failed to benefit from the relatively benign international environment and the perception that the Greek economy is on the path to reform. To some extent, this reflects the inability or even the failure of these listed firms to understand the importance of establishing a good relationship with investors, especially foreign institutionals, who have the money and the appetite to buy the stocks of undervalued, high-growth companies. An easy way to detect the dichotomy of the Greek stock market is to look at the performance of the MSCI Greece Index, consisting mainly of large caps, and the MSCI Small Cap Greece Index, made up of medium-size companies. Both indexes are used by many foreign funds for benchmark purposes so their relative performance reflects the views and presence of foreign funds. This is not very evident so far this year but will become so if one looks at their relative performance over a longer period of time. Although the Small Cap index barely beats the MSCI Greece Index in returning 21.5 percent year-to-August 21 compared to 19.2 percent for the large cap sovereign Index, it trails badly when 2003 and 2004, two superb years for stocks, are taken into account. In 2004, the MSCI Greece Index returned 31 percent, ranking third worldwide among developed stock markets behind Austria and Norway but the Greek Small Cap Index gained slightly less than 4.0 percent to end up in the last position. In 2003, the MSCI Greece Index did even better by gaining 35.7 percent to get in the second place behind Norway and ahead of Germany but the Small Cap Index disappointed once again. In addition to counting on the recovery of their earnings to boost their stocks, large caps – mainly banks, telecoms, industrials and some other listed firms – did something else to strengthen their appeal to the foreign mutual funds, pension funds, hedge funds and insurance companies. They improved their communication with the community of analysts, providing precise and timely information consistently. They enhanced their Investor Relations (IR) departments and in so doing they saw a rise in analyst coverage which, coupled with the roll out of good earnings results and pleasant surprises, helped them attract foreign institutional investors. In addition to seeking broader analyst coverage, they established direct contacts with their institutional shareholders abroad with the top management taking a greater role in the process. They started visiting their shareholders abroad more often to strengthen their relationship and even started organizing proactive roadshows to provide them with better information about the company and its prospects. They started working more closely with international investment banks and brokerages for pre-marketing and the ensuing roadshows. In so doing, they started taking into account geography and the style of foreign funds. So, in addition to London, which remains the most popular destination, they started reaching out to various US cities for institutional shareholders. New York and Boston, the most popular US destinations, were supplemented with visits to the West Coast, visiting funds in cities such as Los Angeles, San Francisco and San Diego, as well as to cities in central states such as Chicago, Minneapolis and Kansas City. In the meantime, some large cap and a handful of medium sized listed companies discovered the existence of European small cap funds, more suitable for their capitalization, in cities such as Frankfurt, Paris and Milan. Good earnings help Fortunately for them, the roadshows and the improved analyst coverage coincided with a stream of good earnings results and a rise in risk appetite, which helped them attract foreign institutional investors at a time Greek funds and individuals started heading for the exit, boosting their stocks to multi-year highs. Of course, events, such as the Olympic Games in 2004, the private placements and public offerings of banks, lottery OPAP and others fuelled the fire, making local investors rub their eyes in disbelief as their stocks hit fresh year-highs. Their example was not easily ignored by medium-sized companies offering a good growth story and a competent management. So, one after the other, medium sized firms like retailer Germanos, Folli Follie, the Mytilineos metallurgical group of companies, Hyatt, Jumbo, Sarantis, Motor Oil, Technical Olympic and a few others started pushing harder towards the same direction with the same goal in mind: to tap the reservoir of foreign institutional investors. A look at the performance of their stocks over the last couple of years shows they succeeded in this endeavor, making their stockholders, both Greek and foreign, happy. It is the performance of listed companies from this group which helps explain why the Greek MSCI Small Cap Index returns more than the MSCI Greece Index so far this year. So, more local companies appear to understand that having to show a good set of financial numbers and a solid growth story is not enough to attract the attention of buyers if you do not know how to market them abroad. It is encouraging that more and more Greek medium-sized companies appear to come to terms with this, but it is disappointing that the lack of experienced IR officers prohibit them from realizing their potential. There is progress overall, but it still falls short of what is needed to broaden the advancement of the Athens bourse to include more worthwhile small- and medium-sized companies.