ECONOMY

Bourse recovery needs communication policy

The creeping credibility crisis of the Athens Stock Exchange (ASE) is generally recognized as one of the basic reasons for the doldrums in which the bourse finds itself at present. It may be useful to seek the causes of the problem before we look into «what is to be done.» I believe that the credibility crisis is related to the ineffective way in which everyone involved in the stock market have been conducting themselves in the last two years. In particular, the market intermediaries and other factors involved, such as institutional investors, basic shareholders, lead managers and the financial press, have generally exhibited a low degree of responsibility. It is, nevertheless, necessary to move beyond this approach, which can be tantamount to witch hunting. The reason is that the stock market is an institution useful for all players in an economy whose various parts aim to make a profit. At the same time, the speculative drive, being part of human nature, often leads to excesses when it is not checked. The credibility crisis is interwoven with the anarchic and excessive growth of the stock market. Prices shot up in a short space of time and then fell. We are already going through a phase of restructuring in the direction of rationalization. The market will ultimately be left with fewer and more credible stockbrokerages, listed companies, institutional investors and lead managers. The institutional framework will offer more effective protection to investors. The financial press will become more authoritative, and investors will rationalize their stock market behavior. All these require time. In the meantime, a series of «technical» interventions can help. Expediting the application of international accounting standards is a positive measure. The professional management of social security fund reserves from mutual fund companies now must follow. The introduction of generous medium- to long-term tax incentives for investors to retain stocks and the taxation of gains from short-term placements will also have a positive impact; the introduction of market makers will improve the trading volume of small and medium-capitalization stocks; the stock market ombudsman will help the investor who has a complaint; certification of the staff of stockbrokerages and other intermediaries is a correct, though belated, measure; and the linkage of ASE with the Istanbul and Belgrade stock exchanges can help boost overall capitalization and the volume of trading. Nevertheless, all these steps are likely to make only a marginal contribution to the rejuvenation of ASE; the return of foreign investors remains a necessary requirement to give the market an effective boost. This prospect, however, will remain uncertain, possibly belying expectations. This is because the size of the Greek market will remain small, with few substantial investment options in terms of capitalization and trading volume. The likelihood of our economy evolving into a «tiger» within the eurozone is especially low, and there does not seem to be any strong will for the adoption of radical restructuring changes. Nevertheless, the growth prospects of the Greek economy remain excellent, with forecasts putting it higher than almost all other 29 members of the Organization for Economic Cooperation and Development (OECD).in the 2002-2004 period. This means that the recovery of the ASE is largely in Greek hands and depends on our own investment behavior. I believe, therefore, that the main weight must be put into the development of a communication policy, promoting the idea of investing in the stock market, to convince the broad saving public that the search for underpriced stocks, combined with the prospect of a rise in prices, will vindicate them in the medium to long term. Many will point out that this practice has brought them losses in the last two years. This is indeed the case, as many bought indiscriminately stocks of poor quality at meteoric prices. The media have a significant role to play in upgrading investment education. Let us also be mindful of the fact that profits are a reward for undertaking risks, and will be enjoyed by the few patient individuals who will see hidden values emerge at some future point in time. (1) Investment director and member of the BoD of Omega Stockbrokers.