Market delight at election developments
The Greek securities market received a major boost on Monday from the extent of New Democracy’s victory in Sunday’s European and regional elections and the government’s intention to lead the country to a general election in the next few weeks. Analysts noted on Monday that Sunday’s developments have lifted the barrier of political uncertainty and reduced the pre-election period that had threatened to condemn the economy to the loss of another four months.
The prospect of a new government that will be business- and investment-friendly saw foreign funds pile in and send trading volume at the Greek bourse soaring, adding some 2.35 billion euros to its capitalization in a single day. At the same time, Greek sovereign bonds saw their yields dive to historic lows, with that of the 10-year benchmark falling to 3.147 percentage points (down 6.5 percent) and the yield on five-year debt sliding 6 percent to 1.957 percentage points.
The snap election, analysts explained, offers the market optimism with regard to a series of investment plans that had frozen over the last few years, as well as fresh hope for action on privatizations, galvanizing investors and banishing the concerns that had aggravated the atmosphere in the last few weeks due to the government’s handout talks.
As Athanasios Vamvakidis, global head of Foreign Exchange Strategy at Bank of America Merrill Lynch, told Kathimerini, Sunday’s election result was very positive for the market as it diminishes political uncertainty considerably, with Greece likely to soon have a new and very strong government with political capital for reforms. If the New Democracy government puts its growth-friendly plans into action, the economic recovery will strengthen, triggering a more sustainable rally in Greek assets. The investments that had to wait for the long pre-election period to end can now proceed.
That was also reflected in the outperformance of investment-related stocks at the Athens Exchange. Fast Finance economist Loukas Papaioannou told Kathimerini that market aggression over stocks whose investment plans have some state involvement illustrates the importance foreign investors attribute to the completion of investment plans that have been stagnant for years.
