From the summit to the swamp: Three years since the ASE’s high

Today is the third anniversary of the day on which the Athens Stock Exchange hit its historic high. The depth of the subsequent plunge makes the 6,355.04 points of September 17, 1999, look even higher. Yesterday, at close of trading, the general index stood at 1,940.72 points. Thirty-six months after the «mad summer» of 1999, the bourse on Sophocleous Street seems to be drifting aimlessly. Confidence is shaken, the institution is rife with suspicion, investors are staying away, because they know from bitter experience that their investments on the stock exchange do not guarantee returns but instead carry great risks, up to and including the loss of their capital. From 1997 until 2000, 27 percent of Greeks aged 18-65 invested in the Athens Stock Exchange. That amounts to 1.5 million people, making this one of the most important social developments in Greece in the last few decades. The crisis that first showed itself in 1999 had been born a year earlier, when the number of companies listed on the exchange reached a record high. The result was that investment fever hit the whole country. At the international level, the crisis on the Russian market was approaching and was shaking the international markets, although the Wall Street bull run was leading analysts to talk of the «American miracle» in describing the world’s largest economy – which has been in a slump for the last year. In Athens, shares kept hitting their upper volatility limit, 8 percent, day after day throughout the summer of 1999. This created a climate of euphoria that seduced more and more new investors. The central depository registered a million new accounts. Most of the rookies were using their life savings as capital. March 9, 2000, was a significant day for the ASE. Prime Minister Costas Simitis held a news conference at the Zappeion Mansion on Greece’s application to join the EU’s Economic and Monetary Union. The ASE’s general index, which was climbing 2.5 percent, began to show great pressure as he spoke. As the conference was broadcast live on television, viewers were treated to the sight of the graph of the general index diving as the prime minister spoke, rousing suspicions of market manipulation. The Finance Ministry’s crimes squad and the Capital Markets Commission sprang into action. The results of their probe were made public on May 2, after the general elections which PASOK had won. No one was found culpable. After the elections, interest rates dropped further and the Capital Markets Commission announced a «White Book,» a series of 30 measures aimed at the institutional strengthening of the Athens bourse. Since then until today, the exchange has been very subdued. Capitalization has crashed from 78 trillion drachmas (228 billion euros) in September 1999, to 25 trillion drachmas (73 billion euros) at yesterday’s close. The authorities’ empty promises, the measures taken to bolster the market, the businessmen’s announcements of bold business moves have not tempted investors back. No one has given a frank explanation of where those trillions of drachmas went. Analysts have long said the link would be short of oil after major companies started to pull out of Azerbaijan when they failed to make big offshore finds. Experts have also argued that a shorter link to Russia or Georgia would be more logical.

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