The Greek stock market reacted strongly on Monday to hopes a pro-bailout party will win crucial national elections next month, which would avoid a catastrophic rift with international creditors and keep the struggling country within the euro currency union.
The General Index, which was moving into positive territory from the beginning of trading, reached +7,36% intraday at 52,90 points.
The General Index climbed 7,7% during the session, while the rise of Alpha Bank and Eurobank stood out.
Four polls published Sunday reversed previous trends to indicate that conservative New Democracy could come first in the June 17 vote, slightly ahead of the anti-austerity radical left Syriza party. Although the conservatives would still fall short of a governing majority, the surveys suggested they could form a coalition government with socialist PASOK, which has also pledged to stick to Greece’s austerity commitments.
Greece’s bailout creditors – the other countries in the 17-nation eurozone and the International Monetary Fund – insist that if the country reneges on its austerity commitments, the rescue loans will stop.
Fears of such an outcome have battered Greek financial markets for weeks, pushing the Athens General Index to close at a 22-year low of 485.18 points on Friday. The latest polls, however, helped it claw back some of those losses.
“This is clearly due to the polls,” said Sergios Melahrinos, analyst at Solidus Securities. He noted that if the two pro-bailout parties manage to win the election and have Greece honor its austerity commitments, banks would gain access to rescue money needed to avoid collapse. Under the country’s latest international bailout, domestic banks that took huge losses from a bond swap that more than halved Greece’s privately-held debt will receive billions of euros to boost their capitalization. If a new government in Athens unilaterally tears up the bailout deal — as Syriza has threatened to do — the recapitalization would fall through.
“A potential win by the parties that back their recapitalization would be extremely good for lenders.”
But Melahrinos warned that the market would remain vulnerable to the ups and downs in the polls in the leadup to the elections. “New polls that show a reversal would obviously change the market picture.”
The General Index finally closed at 518,49 points, up 6,87%, while the banking index ended with a 6,34% rise at 204,39 points.
(source: Capital)
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