Greek shares see huge fall
Banks hit by big losses on first day of trading after five-week shutdown
GREEK bank shares are expected to be hit by more losses today after a 30 per cent plunge on the first day of trading following a five-week stock market shutdown.
Traders said buyers were not likely to start looking for bargains until yet lower levels were reached.
“Market value is being destroyed on very light volumes as buyers stay away from bank shares,” said one fund manager who declined to be named. “It will take some days for the market to balance out.”
Greek stocks unofficially closed with losses of 16.2 per cent, a slight recovery after plunging nearly 23 per cent on opening. One fund manager described it as “herd behaviour” and said few people were buying.
All five shares comprising the Athens bourse’s banking index – National Bank of Greece, Alpha Bank, Piraeus Bank, Attica Bank and Eurobank – were locked down at the daily volatility limit with no buyers after early trades.
Once investors’ darlings as they expanded into under-banked Balkan countries a decade or more ago, Greece’s lenders have been battered by bad loans, a flight of euros from Greece and lately by the imposition of capital controls.
Greece’s banks have seen deposits severely depleted as Greeks have withdrawn their euros for fear they would be forcibly converted into a new drachma outside the euro zone. The banks have been propped up by emergency money from the European Central Bank.
Fears existing shareholders could see their holdings diluted given banks’ need to recapitalise were also keeping buyers at bay, traders said.
“It is far from clear that when recapitalised these banks will immediately get back to normal and that they will shoot up to trade nearer book value again,” said a UK-based opportunity investor currently holding Piraeus shares.
The banks may need as much as £18 billion to recapitalise. The flood of money leaving the country out of fear Greece would leave the euro zone culminated in authorities imposing capital controls on June 29 to prevent a financial meltdown.
Athens will make it a priority to recapitalise the lenders by the end of this year, probably using a bailout fund to plug capital shortfalls, a Greek central bank official said over the weekend.
“Shareholders could get diluted in a very unpleasant way, but bear in mind that the price to book is already very low,” the opportunity investor said.
“Even if new money comes in at a discount to book value, then it’s probably not the end of the world. There will be some value left. But to put an exact number on what this could be is very difficult.”
With authorities set to extend a short-selling ban that expired yesterday, the liquidity situation was improving, with Greece’s central bank unlikely to ask the European Central Bank for an increase in emergency funding thanks to cash inflows.
Sources said the untapped emergency liquidity assistance (ELA) buffer had grown to about £3.5bn, helped by tax and tourism inflows and pension payments.
Meanwhile, data released yesterday showed Greek manufacturing activity plunged in July to its lowest level on record.