Speculation batters ASE

The Athens Stock Exchange, already hit by the uncertainty in international markets, also appears to be reeling in its inability to cope with otherwise useful investment tools, such as buying on margin, short selling on shares and open positions on derivatives, because of a lack of liquidity, the market’s lack of depth and other problems. Yesterday, the general index lost 2.38 percent to close at 1,771.78 points, the lowest point of the year, returning to the level of March 1998, just 87 points above where it was in July 1990. Market watchers say the situation is dramatic and may be the worst the bourse has known in decades. This reflects the lack of credibility in the institution, as well as the problems faced by many listed companies. This, in turn, allows speculators to operate at will through the method of short selling – selling stock one does not currently own in the hope its price will keep falling. The Athens Stock Exchange yesterday denied reports blaming the market’s drop on short selling and buying on margin, saying that only 2.1 million shares over the previous six months had been involved in short selling. In the last few days, however, short selling (although a small part of transactions) appeared to be the main means of pressure on particular large-capitalization stocks, such as Commercial Bank, Viohalco, National Bank, Alpha Bank, Piraeus Bank, and others. For example, on Tuesday, 40,820 shares of Commercial Bank were sold short, representing 28.9 percent of the stock’s turnover that day. The same applied to 21.44 percent of Viohalco’s sales that day. On Friday, September 27, Commercial’s stock was sold short to the tune of 23.11 percent and Viohalco’s to 21.35 percent. In the eight sessions from September 23 to October 2, the price of Commercial Bank stock fell 14.05 percent, when the general index lost 6.2 percent. During this time, 196,140 shares of Commercial were sold short. Although the number of shares offered for short selling is not particularly large, it has a decisive effect on the price, due to the very low trading volume and limited market depth. Even worse, speculative activity is giving rise to rumors, such as the impending collapse of listed companies, bankruptcies of brokerages, black holes in banks, and so on.