Shock and awe! For second consecutive day, Athens Stock Exchange is on free fall with more than 4 billion euro to have fled during the last two sessions. The free fall seems to be hard to stop and at 3:50 pm, the General Index shows losses of -9.64%! Ten minutes earlier the losses were at -9.88%!
4:13 pm – 7.30%
4:15 pm – 6.81%
According to Capital.gr, large institutional funds leave the Athens Stock Market with aggressive sales and this has a direct impact on the prices of all shares.
Under “pounding” are banks and the remaining shares at FTSE 25, with the effect that “brokers have no time to execute sell orders, especially from abroad,” stresses Capital.gr
The General Index is at 880.71 units, that is is has returned to the level of 2013. Already yesterday, (Oct 14/2014) it had fallen below the “psychological level of 1,000 units.”
Greek media report as causes for the tumbling “political instability” and the “frightening prospect of an early bailout exit.”
Yield of 10-year Greek bond at 7.78%. The highest since May 2012 when Greece sought the aid of International Monetary Fund & Co (via zougla.gr)
Why the plunge? Political facts
While there is a general plunge of stock markets internationally due to the oil prices tumbling, there are also some additional Greek facts that may have caused the Greek Stock Exchange to fall.
1. Samaras’ coalition government insist to exit the bailout program earlier than scheduled and return to the markets. However the Eurogroup meeting was very clear beginning of the week, turning down Samaras’ plans and head of Eurogroup Joeren Dijsselbloem stressing that
“Any discussion for Greek aid program exit is premature.”
Dijsselbloem said also that “a bailout exit could be discussed 6-9 months after the banks stress tests.”
Markets most likely do not trust the bailout exit and consider return to the markets not possibly a success.
2. Main opposition party, left-wing SYRIZA is constantly over 6% ahead of Samaras’ Nea Dimokratia in public opinion polls.
A left-wing party in the government could scare markets but a government change is not imminent. Early elections due to Greek gov’t failure to elect the new President of the Rupublic may take place in February or March 2015.
3. Government spokeswoman Sofia Voultepsi claimed yesterday that
“ATMs do not need much to stop working, if Tspras (leader of SYRIZA) plays the tough guy with the Europeans.”
Can fearmongering targeting Greek voters scare away stock marketers? I doubt it in this context of today’s crash.
4. Upcoming stress tests for banks.
What Greek marketers think
Professional marketers seem “extremely alarmed” by the volume of sales on the Athens Stock Exchange , however vendors seem to care less about the reasons that triggered the free fall and more about how to limit their exposure.
“It is obvious that markets evaluate Greece without bailout much lower than with it,” Alexander Sinos, CEO of Solidus Securities.
Vangelis Haratsis, CEO of Beta Securities sees the fall due to a combination of four parameters, like the general investment climate globally, the bank stress tests, the political risk in Greece, the government’s efforts to exit the bailout.
Takis Zamanis, chief negotiator of Beta Securities: “We have never seen such behavior in the market. There is too much pressure for liquidations. The exit door of the Greek Stock Market is very narrow and therefore it expands the volume of sales. I think beyond the dispute with the IMF and the EU and the political developments, there are factors not been seen or not been properly assessed by the market and these factors will become more apparent in order to justify what we are witnessing in our terminals during the last 24hours. “ ( more marketers’ quotes here)
Why the plunge? The “Bailout exit” factor
However some bankers justify the plunge with the marketers’ fear of bailout exit.
“The collapse of Greek bonds and shares within a day by 10%, has nothing to do with conspiracy theories, or pressure on the government and the opposition,” Greek banker told protothema.gr. “It is that the bonds administrators see the governments’ efforts to exit the bailout program arithmetically. Since the numbers do not add up, then they proceed to sales of bonds and equities. “
According to ProtoThema, it was the acquisition of 5% of Alpha Bank by Wellington Capital Management, a large U.S. fund, that stopped the plunge today. There are estimations that a lot of American funds keep an eye on Greece, take advantage of the plunges and buy cheap.
“Back in 2012, there were 5-6 funds buying bonds at 17 cents and now there are hundreds of funds, considering Greece as an opportunity as it has the hard euro and it is an emerging market, “ an unnamed source told PrThema.
Apart from the sell off there were sporadic purchases today, and this is an evidence that the rapid decline in prices favors the buyers who acted quickly.
At the end of the Greek stock market day, the General Index closed at 888.93 units and losses at -6.25 percent.
PS Tomorrow is another day… so it’s still time for a quick swim at the sea 🙂