Bonds, Currencies, Emerging Markets, Funds / ETFs, Stocks

Greek Crisis: Why The Athens Stock Exchange Plunged On Reopening The 3rd Of August

After five weeks of closure, the Athens Stock Exchange reopened on Monday and immediately the trend went sharply down. Investors do not believe that a recovery of the Greek economy could occur soon.

Greece Map

Greece’s stock market reopened after five weeks to the most savage wave of selling in decades, underlining a crisis that’s crippled the economy and pushed the country’s euro membership to the brink.

Banks led the plunge following the shutdown, which was due to capital controls to prevent the lenders from bleeding more deposits. Piraeus Bank SA and National Bank of Greece SA sank 30 percent, the daily maximum allowed by the Athens Stock Exchange. The benchmark ASE Index dropped 16 percent on Monday after sliding as much as 23 percent.

athens stock exchange general index bloomberg

Analysts said stock prices could begin to recover in the weeks to come, bringing much-needed capital into the country, as investors with an appetite for risk look for bargains.

In yet another sign of trouble, though, new survey data on Monday showed a fall in Greek manufacturing activity since the government imposed controls in late June on the flow of money out of Greece.

Why the Athens Stock Exchange plummeted on the 3rd of August?

Exchange traded funds try to reflect the performance of an underlying market. However, there are times when an ETF may diverge from the net asset value, especially with international markets. While the Greek bourse was closed, U.S.-listed GREK traded at double-digit percentage discounts to its net asset value, reflecting investor’s concern with Greece-related assets on the New York Stock Exchange. [While Athens Exchange is Closed, the Greece ETF Show Goes On]

With the Greek exchange back online, normal arbitrage activity resumed in the Greece ETF. GREK now shows a slight 0.6% discount to its NAV. GREK has also been dragged down by its large 22.0% tilt toward the weakened financial sector.

If you decided to invest in Greece, this ETF may have been a good option,

Estefania Ponte, research director at BNP Paribas Personal Investors, told Bloomberg.

It reflected the underlying asset well.

However, the Monday decline in Greece also reflected a surge in panic selling as limits on withdrawals, a crippled economy and an uncertain climate weigh on the market.

Financial information company Markit calculated that manufacturing activity in Greece plunged during the month to 30.2 points, the lowest reading ever – a reading above 50 reflects positive activity. Additionally, the Economic Sentiment Indicator, a monthly survey of business and consumer confidence, dipped for a fifth consecutive month in July.

We don’t recommend investing in Greece at this point because the situation isn’t clear enough,

Ponte added.

While we do not see it leaving the euro, there’s still too much uncertainty and volatility going forward.

Sources: Bloomberg, Les Echos, Reuters

Ronis Sofroniou is the author of Eyes on Europe & the Middle East and  was born in Limassol, Cyprus, and studied Human Resources Management and French Language at Montpellier 3 University (2007) and granted with a Master’s degree in Oil and Gas Management from Abertay Dundee University in 2014. He worked at the Cypriot Embassy in Paris in 2009 and just after as a B2B salesman person in the smartphones market for some years. Currently he curries out a research study about Forex Companies Scams and Frauds in Cyprus. He lives between France and Cyprus where he works as an interpreter  and French teacher.

About Eyes on Europe and The Middle East

A blog dedicated to discuss independently without any instrumented propaganda against democratic beliefs and freedom of speech in Europe and the Middle East . [email protected]


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