Athens stock market huge annual gains point to 2014 economic recovery

Athens stock market huge annual gains point to 2014 economic recovery


By Lefteris Yallouros – Athens

Economists will tell you that a recovery of the economy is always preceded by a rise in the stock market.

Greece has much to celebrate if this is the case, as 2013 marked a great year for the Athens stock market after losing 91% of its value between its peak in late October 2007 and its trough in early June 2012.

The benchmark index registered a remarkable annual growth 28.06 percent in a year that saw the demotion of the Greek market from developed to emerging by MSCI.

The Athens Exchange general index closed on Tuesday at 1,162.68 points, adding 0.62 percent to Monday’s 1,158.03 points. The large-cap FTSE/ATHEX 25 expanded by 0.62 percent to end at 384.84 points.

Real GDP fell by 3.8% between the second quarter of 2012 and the second quarter of 2013. However, investors feel more secure with putting their money on the Greek recovery since the economy’s future in the euro zone is considered certain and the new “emerging market” status of ATHEX is also enticing.

With GDP more than 25% below its pre-crisis peak in 2007, it is obvious that there is huge potential for profit when the economy starts to recover.

JPMorgan’s Francesco Conte, who manages about $2.8 billion, told Bloomberg last month: “I’m very overweight Greece because I find very, very good opportunities, very well-run companies and very cheap valuations. Greece is only just emerging from the crisis. Because they’ve cut their cost bases so low, the profitability growth is going to be enormous if we get positive GDP growth.”

Prime Minister Antonis Samaras stressed in an address to the nation that “we are no longer asking for loans, we achieved what is self-evident: to meet our needs and, this, with the primary surplus. We took the first step to stand on our feet, we put an end to the vicious circle of recession and 2014 is dawning with prospects of recovery and growth”.

As investors begin to flock back to the stock market and the economy is showing signs of recovery, the country will need to steer away from political disputes that may derail recovery efforts now coming to some fruition.

The Economist recently placed Greece in a list of countries where there is high risk of social unrest in 2014, including Syria, Egypt and Zimbabwe amongst others.  With the Greek recession having destroyed almost a quarter of economic output and sent unemployment surging above 27 percent, the risks that will turn investors away from the country will have to be contained by the government in 2014.