The current value of foreign institutional investors’ holdings in Greece’s four top banks – National (NBG), Alpha Bank, EFG Eurobank and Piraeus – is now estimated at -20 billion, after a steady increase over the last few years. By contrast, local investors have reduced their stock exposure, taking advantage of the rise in prices. The bad news is that along with foreign institutionals more and more speculative short-term foreign funds pour in that are particularly unstable. Bank officials stress that the participation of hedge funds is generally limited, but recognize that unless the current situation changes the participation of capital such as hedge funds will increase, along with the possible instability of the local market. They say that if there were a serious negative swing in global economies then these funds would stage a massive flight with very serious consequences for capital markets and international economy. It is the buying fever of foreigners for bank stocks that has pushed their prices this high: Already since the start of 2007, the banking index shows shows gains of 12.44 percent against a rise of 8.38 percent for the ASE general index. Outperformance With the exception of 2005, when the general index was somewhat higher than the banking index (31.5 percent against 29 percent), the latter has performed better in recent years. In 2006 it came to 23.89 percent against 19.93 percent for the general index, while in the previous years the margin was even greater (44.3 percent against 23.1 percent in 2004 and 58 percent against 29.5 percent in 2003). Today foreigners control about 50 percent of NBG shares, 42 percent of Alpha Bank, 40 percent of Piraeus Bank and 25 percent of EFG Eurobank. The Latsis family controls 40 percent of Eurobank, so the foreigners’ share comes to 42 percent. The interest from abroad is attributed to the rapid growth of the Greek market and its impressive profits, as well as the local banks’ expansion beyond the borders. The recent Piraeus Bank business plan provides for an average annual rise of profits of 24 percent in the 2007-2010 period, while the other banks’ plans are eagerly anticipated: NBG on 22 February, Eurobank in end-March and Alpha in end-April. At the end of 2006 foreign investors controlled 46.64 percent of the ASE’s total capitalization, from 45.42 percent last November. Foreign capital influx in December 2006 reached -884.21 million, while domestic investors mostly sold their shares, as they recorded a net outpouring of -933.38 million. In December there was also a rise in foreigners’ participation in the blue chip FTSE 20 index at 52.31 percent from 51.47 percent in November. In contrast, the mid-cap FTSE Mid-40 index saw the participation of foreigners decline from 42.67 percent to 39.8 percent, while in the small-cap index the decline was from 16.97 percent to 15.63 percent. The total inflow from foreign investors in 2006 came to -5.52 billion, posting a 5 percent rise from 2005. The outlay from Greek investors for the same period reached -5.65 billion, led by private investors (-3,654.51 million) and the public sector (-1,368.5 million). The biggest inflow in December came from Luxembourg (-341 million), followed by the UK (-168 million) and the US (-106 million).