Gov’t fails to ap­pease mar­kets

Ef­fort to ease fears over lo­cal banks has back­fired, as in­vestors see it as ac­knowl­edg­ment of prob­lem


Pres­sure con­tin­ued yes­ter­day on Athens-listed bank stocks, with their sec­toral in­dex drop­ping to a new 32month low, as the mar­ket re­mains skep­ti­cal about the gov­ern­ment’s in­ter­ven­tion to res­tore calm.

The Athens Ex­change (ATHEX) bench­mark has lost 7.4 per­cent in the last three ses­sions. The banks in­dex has fol­lowed up its 24 per­cent slump in Septem­ber with a fresh 15 per­cent de­cline in the first seven ses­sions in Oc­to­ber, send­ing the cap­i­tal­iza­tion of the four sys­temic banks be­low 5 bil­lion eu­ros be­tween them, from 8.7 bil­lion at the start of the year.

The gov­ern­ment’s at­tempt to ap­pease in­vestors by pub­li­ciz­ing its in­ten­tion to launch a as­set pro­tec­tion scheme that may in­volve state guar­an­tees has brought about the op­po­site re­sult. Given that the plan is far from ready and is run­ning into a se­ries of ob­sta­cles, such as leg­is­la­tion re­gard­ing state sub­si­dies, the mar­ket has in­ter­preted it as a pub­lic ac­knowl­edg­ment of the prob­lem by the au­thor­i­ties.

On that ba­sis the mar­ket has not just ig­nored the new pledges banks are mak­ing to the Sin­gle Su­per­vi­sory Mech­a­nism (SSM) re­gard­ing a sub­stan­tial re­duc­tion of bad loans from 47.7 per­cent of all loans to­day to un­der 20 per­cent by end-2021, but it is al­ready act­ing as if it has taken their fail­ure for granted.

Bank man­agers are seek­ing a cat­a­lyst that would re­verse the neg­a­tive sen­ti­ment; some lenders are con­sid­er­ing is­su­ing their third-quar­ter fi­nan­cial re­sults ear­lier than planned, along with the de­tailed plans for the re­duc­tion of non­per­form­ing ex­po­sures dis­cussed with the reg­u­lat­ing au­thor­i­ties.

As do­mes­tic an­a­lysts note, con­cerns over the bank­ing sec­tor do not ap­pear to be sub­sid­ing; in­stead pres­sure has spread to other stocks too, with for­eign in­vestors liq­ui­dat­ing their po­si­tions, ig­nor­ing the healthy fun­da­men­tals of other listed com­pa­nies in their ef­fort “to sell off what can be sold.”

Con­se­quently the Greek stock mar­ket’s in­dex has fared the worst in the de­vel­oped world since the start of the year, fall­ing 21 per­cent, with its peers in China (down 18.7 per­cent) and Turkey (17.7 per­cent) fol­low­ing.

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