ECONOMY

Greek banks covered

The strong growth characteristics of Greek banks and the small size of the market has helped protect the sector from a sell-off on the global market, according to Notis Mitarakis, director of research at Fidelity Investments asset management. Mitarakis, who is also president of the Hellenic Bankers Association of Great Britain, told Kathimerini of the need for improved transparency in Greece’s corporate governance and the large presence of foreign institutional investors who appear ready to exercise their shareholder rights. More than 50 percent of the capitalization of the Greek stock market is in the hands of foreign, mainly institutional, investors. Fidelity, which manages internationally more than 1.5 trillion dollars (about five to six times larger than Greece’s GDP), is one of the biggest investors in Greece, however Mitarakis refused to unveil more details (regarding volume or companies involved) due to company policy restrictions. The reason for the large increase in stakes held by foreign investors in Greece is the limited interest in equities by local investors and an improvement in the attractiveness of the Greek market to foreign investors, including interest shown in the privatizations that have taken place and those that will soon take place. Regarding the first point, Mitarakis said that unfortunately Greek retail investors have downgraded the stock market after the bubble of 1999, forgetting its long-term investment potential and missing out on any recent rally. Mitarakis also pointed out that the Greek social security system does not invest in the stock market to the same extent as that of other countries. Foreign investors prefer to take positions in Greek businesses run by local managers rather than proceeding with direct investments «as they feel Greece has certain peculiarities which prevent them from investing directly.» However, added Mitarakis, the Greek market has become more attractive due to the introduction of the euro which reduced interest rates and allowed for increased borrowing by businesses and households. Additionally, the proximity of the Balkans is very important, geographically and culturally, where Greek businesses have the advantage of already having entered those markets. Referring to the impact foreign investors have had on the Greek market, Mitarakis said institutional investors have better long-term strategies and have greater expectations for transparency and management control. «Foreign investors are exercising their rights as shareholders in listed companies more and more,» he said. Responding to a question about whether the general sell-off of shares in the global banking sector is a threat to Greek bank stocks, Mitarakis said that, according to all the signs, few had taken positions in subprime products and that generally they have strong growth potential. Additionally, the small size of the banking market allows large investors to maintain their positions in Greek banks at a time when they are possibly reducing their stake in the sector worldwide.