ECONOMY

Greek stock market continues to languish in the doldrums

Gulf war or no Gulf war, Greece’s all-important retail investors are staying away in droves from a battered Athens stock market that they drove to a record high exactly three years ago on a wave of euro euphoria. Yesterday, the Athens Stock Exchange’s benchmark index closed at 1,933.18 points, 70 percent below its peak at 6,484.38 points on September 17, 1999 and at levels last seen in October 1998. Just as the bull run of 1998-9 was driven by retail investors plowing unprecedented liquidity into equities, anticipating Greece’s successful eurozone entry, the market’s dramatic collapse has been coupled by an evaporation of trading. Trading volumes have dried up to a daily average of about 90 million euros in the last quarter, a trickle compared to September 17, 1999, when volume hit 1.4 billion euros. Analysts warned just before the market peaked that triple-digit gains in many shares had overstretched valuations. Morgan Stanley’s equity strategists calculated at that time that the fair value for the benchmark index was 4,067 points, implying some 22 percent less than its peak. «There has been an explosive growth in retail investor activity in the Greek stock market, stimulated by the bull market and the fact there is no capital gains tax,» they said at the time. The investment bank noted that retail investor accounts had mushroomed to 1.2 million from just 150,000 two years earlier, dominating daily trading volumes. Traders look back on the market and recall a feeling that anything was possible. Mirror image «We’re seeing the mirror opposite of this euphoria now with that rare species, the retail investor, afraid to come back,» said trader Nick Diamantopoulos at Kappa Securities institutional desk. Yesterday, Iraq’s pledge to readmit arms inspectors in the face of US military threats, which sent relief ripples through world financial markets, was not enough to help Greek shares join a European rebound. The Athens bourse fell 0.39 percent – ignoring early gains in Paris and Frankfurt of more than 2 percent – and 101 stocks dropped to new lows. The Greek market closed before Europe turned south. Risk aversion after a prolonged bear market has turned off Greek retail investors, despite a collapse in returns on alternative investments such as bonds after the country joined the eurozone in January 2001. In 1999, Greek investors were told that joining the eurozone would bring lots of goodies – lower interest rates, higher growth, a more stable economic climate and increased foreign direct and portfolio investment. Greece’s economy did grow faster than its European peers with output expanding at an annual rate of 4.0 percent in the second quarter this year. But this has done little to revive the stock market and the once high-flying Athens bourse has been unable to renew its love affair with investors. «The international market slump – events such as the September 11 attacks – came much later, after the downturn on the Athens bourse had already begun,» said financial daily Naftemboriki yesterday. «Today the most difficult task facing stock market authorities is rebuilding the confidence of retail investors (in the stock market).»