Bourse recovery

Four years after the bursting of the stock bubble and the prolonged subsequent lull, the Athens Stock Exchange (ASE) is once again showing signs of recovery. Following the widespread international uncertainty that accompanied the Iraq war, the ASE has ridden on the back of a Europe-wide recovery. The battered bourse has received a boost from gains in European markets and from companies’ actions in the domestic economy that have fueled expectations of restructuring on the local business scene, prompting an investor comeback. A significant number of accounts that long lay dormant have become active again. Since April 1, shortly after the American victory in Iraq, the ASE has gained nearly 55 percent, exceeding the gains of most of the world’s markets. Over the same period, Frankfurt has gained 45 percent, and Zurich and Paris about 25 percent. The obvious question is whether conditions can sustain the current upswing on the Athens bourse. The truth is that after the 1999 shock, the capitalization of most shares fell below their book value. The recent price correction, barring some excesses, essentially brings stock prices back in line with firms’ book value; from now on, any further rises will be based on genuine economic expectations. This progress must be hailed as a sign that Greece’s capital market has been normalized and is being protected institutionally. In order to avoid recreating the 1999 disaster, the authorities must be strict in implementing the law. There is no excuse for not doing so. After so many adventures, the ASE finally has the opportunity to turn itself in a mature market that can underpin economic development and nourish genuine expectations for growth and profit, as befits a eurozone country.