Recovery seen weaker in Greece
The increasing optimism, as regards the global economy and capital markets in 2002, does not seem to be applicable to Greece, senior banking executives and analysts said on Thursday. EFG Eurobank’s deputy managing director, Nikos Karamouzis, and the heads of the departments of investment strategy, Thymios Bouloutas, and of economic analysis, Platon Monokrousos, said during a presentation that, according to all indications, the American economy is expected to recover and boost corporate profits; concerns about results and creditworthiness are receding and problems seem to be confined to branches or particular companies rather than applying across the board. By contrast, the results of Athens bourse-listed companies for 2001 have left «a bitter taste from negative surprises.» Average profits per share were down 15 percent from 2000. Forecasts are unfavorable and a pessimistic scenario is dominant. There is serious concern about transparency and firms’ reliability, as regards their communication policies, as they have generally failed to explain to investors the reasons for the downturn and provide credible prospects. The Athens Stock Exchange (ASE) composite price index has performed 10 percent worse than the European average and 12 percent worse than US markets since the beginning of the year, while profits in 2002 are forecast to grow by 5-10 percent, EFG Eurobank’s officials said. General pessimism There is general consensus in the banking industry that the profitability of Greek listed companies this year will be adversely affected by the gradual introduction of International Accounting Standards before they become obligatory in 2003. Nevertheless, a projected GDP growth rate of 4 percent (EFG Eurobank forecasts 3.5 percent with a tendency to fall) is estimated to be about 2 percent higher than the eurozone average. This creates positive prospects but only on the condition, the presenters said, of additional structural changes in business sectors which do not seem forthcoming. The above, combined with structural problems in the firms themselves, the fact that Greek enterprises enjoy minimal recognition abroad and the downbeat forecasts for the results of banks – which weigh heavily on the composite index – support the pessimistic scenario. Finally, EFG Eurobank officials noted that in Greece, share capital increases tend to be too large for the size of the country’s capitalization in relation to European and US markets. It is argued that had it not been for the September 11 attacks, the economic slowdown in the US would not have deteriorated into a recession. Nevertheless, the recovery is forecast to be weaker than previous ones, because adjustments to the labor market are still required, while forecasters see a rise in interest rates (about 75 to 100 basis points in the USA in 2002 and 25 to 50 basis points in Europe by the end of the year) and low corporate profit growth rates. Share prices are expected to rise in the next two to three months, with gains of 10 to 12 percent for the year. Small- and middle-capitalization stocks will be traded at a premium (unlike Greek ones) and there will be a definite change of trend in emerging markets. The Enron scandal seems to have sparked a big debate among analysts regarding the quality of profits. Huge sums of investment and goodwill were written off in 2001, reducing profits per share, principally among new technology and telecom companies. SSSB forecasts In its latest report, the Schroder Salomon Smith Barney investment house forecasts an average 7-percent growth in profits for Greek enterprises in 2002. This is only marginally lower than the European Union average, which is projected at 8 percent. Germany, the powerhouse of the European economy, is forecast to lead with profits rising 38 percent, followed by Sweden with 36 percent, Denmark with 33 percent and Belgium with 13 percent. The worst performers are seen as Finland and the UK. ASE’s price-to-earnings ratio (P/E) is forecast at 18.8, against an average of 18 in Europe.
