Post by Bozur on Apr 10, 2005 3:30:36 GMT -5
Foreign investors keep pouring their money into the bourse
Government forced to pursue further privatizations to keep them happy
By Dimitris Kontogiannis - Kathimerini English Edition
Faced with intense pressure from the European Union authorities to streamline public finances and unable to deliver higher salary increases to pensioners and civil servants, the Greek government must certainly be glad to find an ally in its bid to change the economic climate and keep the economy growing at annual rates in excess of 3.0 percent. This ally is the foreign investment houses and their institutional clients who have poured billions of euros into the Athens Stock Exchange to snap up shares of blue chips and other promising mid-cap companies, sending their shares to new multi-year highs. To keep its allies pleased, however, the government will have to deliver on its growth agenda, mainly via privatizations.
According to the latest official figures, non-resident investors controlled some 42 percent of the market capitalization (cap) of the FTSE/ASE-20 stock index, made up of Greece’s 20 blue chips, and some 37 percent of the total market cap overall at the end of February. Their increasing presence comes at a time more and more local retail investors are exiting the bourse by selling their stocks and shares in equity funds.
The increased presence of foreign funds has filled the gap left by departing local retail investors and has been generally welcome by government and listed company executives. After all, it is good for the government to find non-resident investors who shrug off the current fiscal mess, focusing instead on some listed companies’ strong balance sheets and forecasts of double-digit profit growth rates the next couple of years. Greek equities outperformed all developed markets in February, returning 13.8 percent since the beginning of the year and retaining first place according to MSCI (Morgan Stanley Capital International) indices.
At the same time, though, this appetite for Greek paper has fanned worries of a massive sell-off by the same players at some point down the road, explaining to some extent the unwillingness of some local investors to enter the market at the present price levels.
Although demand for Greek stocks by foreign institutional investors remains strong, paving the way for an even bigger presence on the local bourse in the future, market participants and others contend it must not be taken for granted.
Pro-growth policy
To please its sole allies in creating a better business and economic climate at a time it is facing strains on the fiscal front, the government has no option but to pursue a pro-growth agenda, focusing on privatizations and PFI and PPI initiatives.
“Privatizations and the concessions constitute the most effective method for attracting foreign portfolio and direct investments,” says the second in command at one of Greece’s largest private banks.
The prospect of privatizations, including partial flotation of listed and non-listed companies controlled by the state, is thought to have played an important role in the positive way some major foreign investment banks have looked at Greek stocks. Although the activities of investment banking divisions and research departments in major foreign investment houses have been strictly separated, following a series of corporate scandals a few years ago, a number of pundits continue to insist that fees and commissions from prospective privatization deals and equity trading have something to do with the positive reports on local companies put out by well-known foreign investment houses. Of course, these arguments have been rejected outright by officers working at the investment houses, though some differentiate between US and European houses, with the former presumably sticking more religiously to the separation principles of investment banking and research divisions.
Visits by investment bankers, fund managers and equity traders, not to mention advisers, analysts and others specializing on the fixed income side have been on the rise for quite some time now, as they all jockey for a share of the Greek pie worth some 2.0 billion euros or more in privatization deals alone.
The government seems to understand the rules of the game, according to market participants, and has sought to divide the pie to please more major international investment banks. UBS, perhaps producing the most visible and influential analysis of Greek banking stocks the last few years, was picked to advise and manage the sale of treasury stock and the subsequent share capital increase of state-controlled Agricultural Bank. Citigroup, CSFB and Deutsche Bank were picked for the sale of a minority equity stake in National Bank held by an state entity (DEKA).
Future privatizations
More are to come. A 10 to 15 percent stake in lottery operator OPAP, a minority stake in Public Power Corporation (PPC) and the likely sale of a minority stake in telecoms incumbent OTE are thought to be some of the deals waiting in the pipeline. Others include the sale of equity stakes and the transfer of management to various entities, including the listed Athens Water and Sewerage Company (EYDAP), the Athens airport company, major ports and other entities. The part-flotation of a 20 to 30 percent equity stake in the Postal Savings Bank is also thought to be part of the agenda, along with the sale of a stake in listed Emporiki Bank.
Undoubtedly, the Greek government has a good reservoir of deals to draw from to both succeed in attaining more efficient allocation of resources, boosting the economy and pleasing the foreign investment houses and their institutional clients. Despite all the talk, the government has done not as much as it should to activate its pro-growth agenda and please its allies. If it continues on the same course, it may find that its allies will start to lose patience. That would be unwise as it does not serve the interests of the Greek economy, the Athens bourse and its constituency.
www.ekathimerini.com/4dcgi/news/content.asp?aid=53777
Government forced to pursue further privatizations to keep them happy
By Dimitris Kontogiannis - Kathimerini English Edition
Faced with intense pressure from the European Union authorities to streamline public finances and unable to deliver higher salary increases to pensioners and civil servants, the Greek government must certainly be glad to find an ally in its bid to change the economic climate and keep the economy growing at annual rates in excess of 3.0 percent. This ally is the foreign investment houses and their institutional clients who have poured billions of euros into the Athens Stock Exchange to snap up shares of blue chips and other promising mid-cap companies, sending their shares to new multi-year highs. To keep its allies pleased, however, the government will have to deliver on its growth agenda, mainly via privatizations.
According to the latest official figures, non-resident investors controlled some 42 percent of the market capitalization (cap) of the FTSE/ASE-20 stock index, made up of Greece’s 20 blue chips, and some 37 percent of the total market cap overall at the end of February. Their increasing presence comes at a time more and more local retail investors are exiting the bourse by selling their stocks and shares in equity funds.
The increased presence of foreign funds has filled the gap left by departing local retail investors and has been generally welcome by government and listed company executives. After all, it is good for the government to find non-resident investors who shrug off the current fiscal mess, focusing instead on some listed companies’ strong balance sheets and forecasts of double-digit profit growth rates the next couple of years. Greek equities outperformed all developed markets in February, returning 13.8 percent since the beginning of the year and retaining first place according to MSCI (Morgan Stanley Capital International) indices.
At the same time, though, this appetite for Greek paper has fanned worries of a massive sell-off by the same players at some point down the road, explaining to some extent the unwillingness of some local investors to enter the market at the present price levels.
Although demand for Greek stocks by foreign institutional investors remains strong, paving the way for an even bigger presence on the local bourse in the future, market participants and others contend it must not be taken for granted.
Pro-growth policy
To please its sole allies in creating a better business and economic climate at a time it is facing strains on the fiscal front, the government has no option but to pursue a pro-growth agenda, focusing on privatizations and PFI and PPI initiatives.
“Privatizations and the concessions constitute the most effective method for attracting foreign portfolio and direct investments,” says the second in command at one of Greece’s largest private banks.
The prospect of privatizations, including partial flotation of listed and non-listed companies controlled by the state, is thought to have played an important role in the positive way some major foreign investment banks have looked at Greek stocks. Although the activities of investment banking divisions and research departments in major foreign investment houses have been strictly separated, following a series of corporate scandals a few years ago, a number of pundits continue to insist that fees and commissions from prospective privatization deals and equity trading have something to do with the positive reports on local companies put out by well-known foreign investment houses. Of course, these arguments have been rejected outright by officers working at the investment houses, though some differentiate between US and European houses, with the former presumably sticking more religiously to the separation principles of investment banking and research divisions.
Visits by investment bankers, fund managers and equity traders, not to mention advisers, analysts and others specializing on the fixed income side have been on the rise for quite some time now, as they all jockey for a share of the Greek pie worth some 2.0 billion euros or more in privatization deals alone.
The government seems to understand the rules of the game, according to market participants, and has sought to divide the pie to please more major international investment banks. UBS, perhaps producing the most visible and influential analysis of Greek banking stocks the last few years, was picked to advise and manage the sale of treasury stock and the subsequent share capital increase of state-controlled Agricultural Bank. Citigroup, CSFB and Deutsche Bank were picked for the sale of a minority equity stake in National Bank held by an state entity (DEKA).
Future privatizations
More are to come. A 10 to 15 percent stake in lottery operator OPAP, a minority stake in Public Power Corporation (PPC) and the likely sale of a minority stake in telecoms incumbent OTE are thought to be some of the deals waiting in the pipeline. Others include the sale of equity stakes and the transfer of management to various entities, including the listed Athens Water and Sewerage Company (EYDAP), the Athens airport company, major ports and other entities. The part-flotation of a 20 to 30 percent equity stake in the Postal Savings Bank is also thought to be part of the agenda, along with the sale of a stake in listed Emporiki Bank.
Undoubtedly, the Greek government has a good reservoir of deals to draw from to both succeed in attaining more efficient allocation of resources, boosting the economy and pleasing the foreign investment houses and their institutional clients. Despite all the talk, the government has done not as much as it should to activate its pro-growth agenda and please its allies. If it continues on the same course, it may find that its allies will start to lose patience. That would be unwise as it does not serve the interests of the Greek economy, the Athens bourse and its constituency.
www.ekathimerini.com/4dcgi/news/content.asp?aid=53777