Greek stock rally holds on as traders prepare for end of bailout

ATHENS: The European equity market whose fortunes have swung on its country’s bailout dramas is holding on to a market-beating rally as the end of the aid programme approaches.

Greece’s ASE Index has almost doubled since a low two years ago, posting the second-best performance among European peers in the past 12 months.

While it has been boosted by fresh relief from the country’s creditors in the period, the advance could continue if the economy stays on its recovery path as the bailout programme winds down this year, say traders and strategists.

Also in focus are Greek lenders’ stress test results in early May, which will show if they need more capital and, if so, how serious the problem is.

“The 2018 view from investors is – just keep going, stick to the path laid out by the creditors, and we will reward that,” Dimitri Dardanis, head of institutional trading at Piraeus Securities SA in Athens, said by phone.

“There is quite a bit of catch-up momentum, but there is also a fundamental reason underpinning it. An improving Greek economy means stocks listed here will perform better, be they banks or energy.”

Greece is finding its way out of a debt crisis that has erased roughly 25bil (US$31bil) from the ASE’s market value since mid-2014, putting it roughly on par with that of Lloyds Banking Group Plc. The benchmark remains about 83 percent below its 2007 high.

This week, the country moved a step closer toward exiting its rescue programme, while economists expect growth to firm up this year and next.

Positive stress-test results for Greek lenders, which have borne the brunt of the country’s turmoil and comprise more than a fifth of the ASE, could usher in more gains for the benchmark.

Piraeus Bank SA said this month it is well placed to fully eliminate emergency liquidity assistance in 2018, while National Bank of Greece SA eliminated its ELA funding in December, people familiar with the matter said last week.

“Investors may be holding back on Greek banks until they are done with their stress tests. There is also a big non-performing loan stock on the balance sheets which makes some investors nervous,” George Athanasakis, director of equity sales at Pantelakis Securities SA, said by phone.

“But economic growth is positive for banks, so we are optimistic.”

Questions remain about the arrangement the country will enter into once it exits its bailout.

Investors might want to see a monitoring programme that allowed creditors to ensure the government is sticking to its reform path even after Greece leaves their direct oversight, said Dardanis. — Bloomberg