Shares crash as Greece reopens stock exchange

NO ONE expected it to be pretty, but after a five-week shutdown, Greece’s money markets have reopened to unprecedented disaster.

Alexis Tsipras

GREECE’S stock exchange has taken a historic beating as trading resumed after a five-week shutdown forced by capital controls, with the main index registering its greatest-ever drop of 16.23 per cent and bank shares particularly hard hit. The ATHEX index on Monday plunged to 668.06 points on its worst fall in nearly 30 years amid a worsening economic climate and the prospect of early elections in the coming months.

The previous worst loss in the stock market’s history was a 15.03-per cent drop in 1987.

“The situation in Greek equity markets will have to get a lot worse before it gets better,” said Luca Paolini, Pictet Asset Management’s chief strategist in London. “There are still critical risks to be resolved.” The country’s main banks took a heavy blow, with National Bank and Piraeus falling to the maximum allowed level of minus 30 per cent.

Alpha Bank finished at minus 29.81 per cent while Eurobank fell 29.86 per cent.

Investors also offloaded unreservedly shares in all the top Greek companies, including gaming giant OPAP, main electricity provider PPC, top telecoms operator OTE and leading refiners HELPE, which were also shedding between 12 and 23 per cent.

“Pressure by sellers was high. It is logical and anticipated by everyone,” stock market chairman Socrates Lazaridis told Bloomberg TV, noting that he expected the market to stabilise in a month’s time.

“We were not expecting something different today,” said analyst Manos Hatzidakis of Beta Securities.

“The stock exchange has not been closed for a month since 1974 ... This is a risk factor especially for major investors,” he said.

The stock exchange operates as normal for foreign investors but local traders face limits on their transactions as part of the capital controls imposed by the government last month.

As a result of the restrictions, Greek investors cannot buy securities with money from their bank accounts in Greece. They will, however, be able to use foreign bank accounts or make cash transactions.

Lazaridis, the stock market chairman, noted that up to 65 per cent of investors present on the Athens bourse are foreign.

The country’s lenders are in a vulnerable position because of outflows of billions of euros from deposits over the past six months.

Some 40 billion euros ($A60.09 billion) has been withdrawn from Greek banks since December, according to the country’s banking association, as depositors hedged their bets on whether the country would stay in the eurozone.

The reopening of the stock market comes after senior EU and IMF auditors held their first meetings with Greek ministers to finalise a new three-year bailout for the country that could be worth up to 86 billion euros.

Running contrary to his promises to eliminate austerity once in power, the bailout has put major strain on Prime Minister Alexis Tsipras.

The 41-year-old premier faced a mutiny among his MPs last month and will hold an emergency party congress in September to avoid a full-fledged split.

Tsipras has warned that early elections — the fourth in three years — will be called if his MPs refuse to ratify the bailout in parliament.