Shift to optimism at London roadshow

Greece constitutes one of the most “optimistic investment narratives” and the biggest recovery story for foreign portfolios and international fund managers at the moment. This was the strongest message to come out of the meetings that representatives of funds and international investment banks had with Finance Minister Christos Staikouras and senior officials of Athens-listed companies in the context of this year’s London roadshow organized by Hellenic Exchanges.

That is also the message emerging from the intentions and moves of major investment entities such as Blackstone Real Estate Partners Europe – one of the strongest US funds – in the sector of Greek tourism, illustrating that confidence in Greece’s investment environment has returned.

Sources say that the interest in the 14th annual roadshow in London was strong, with a high level of participation and a busy schedule of meetings for the minister. At the same time, Greek bonds yields continued to slide.

The investors present at the roadshow questioned the minister on subjects such as the course of privatizations, mainly that of Hellenic Petroleum. Staikouras said in his speech that promoting privatizations is indeed among the government’s priorities, and referred in particular to the Elliniko development project and the further privatization of Athens Airport.

Other priorities, Staikouras added, include the implementation of the country’s pledges to its creditors, strengthening the stability of the credit system, the completion of a new, stable tax framework with a strong orientation toward growth, bolstering liquidity in the real economy, carrying out structural reforms, the management of the private debt and the repayment of the expensive part of Greece’s loan from the International Monetary Fund.

The recent visits to Athens by top investors such as Wilbur Ross, who is also the US commerce secretary, and Prem Watsa, head of the Fairfax investment group, as well as the statement by US Ambassador in Athens Geoffrey Pyatt at a recent energy forum that “now is the time for investments in Greece” signal the change in investment funds’ attitudes toward this country.

Investor confidence in the country’s prospects is clearly reflected in the unprecedented dive in Greek sovereign bond yields, with the benchmark 10-year bond trading at 1.3 percent, against 4.4 percent at the start of the year. This signals a 70 percent drop in the Greek state’s borrowing costs this year, opening the way for improving the sustainability of the national debt and negotiating the primary budget surplus targets.

Jens Peter Sorensen, chief analyst at Danske Bank, notes that Greece’s investment base is expected to broaden considerably, so investors want to act before the fact and buy Greece now instead of later, when the country is back in the standard international bond indexes.

The expansion of the investment base is apparently a major challenge that the country will have to meet soon. “The moment has come for those who had stayed out to buy the significant economic story of Greece,” chief macroeconomics analyst at Nordea Asset Management Sebastian Galli tells Kathimerini.

One of the most important elements of the London roadshow was the reappearance of major investors such as Fidelity and Henderson, who had not shown any interest in Greece or attended any of its roadshows since 2010. “Many investors are now referring to optimism about Greece, as they believe that the country has turned the page,” an analyst who participated in the London contacts tells Kathimerini.

There is also strong interest in Greek corporate bond issues because of the low yields in the bonds market, while the sentiment has clearly changed as far as local banks are concerned, swinging from negative to positive: Instead of focusing on the management of bad loans, liquidity and the capital sufficiency of banks, investors are now monitoring the local lenders’ future profits and their asset returns.

Among the issues that ranked high on the agenda of international funds were the property sector, which is expected to be the big winner from the acceleration of investments, and the retail commerce sector. “Deals are coming in properties, renewable energy sources, corporate restructurings and privatizations,” a senior official from a foreign investment firm that participated in the roadshow tells Kathimerini. “Just the deals appearing on the table would suffice for Greek growth to reach up to 3.5 percent in 2020,” he estimates, showing the positive climate for the country even though many analysts argue that the slowdown in the eurozone constitutes a risk and a challenge for Greece.

The market is also anticipating more positive news from Prime Minister Kyriakos Mitsotakis’ trip to the US this week, where, besides Ross, he will meet with funds and investment banks in the context of the Bloomberg Global Business Forum; he will be one of the speakers among outgoing IMF head Christine Lagarde and many other officials including delegates from major investment banks such as HSBC, JP Morgan, Goldman Sachs, BofA Merrill Lynch, BNP Paribas and Citigroup, and funds such as BlackRock, Blackstone, Farallon, Franklin Templeton, Investec, Bain Capital, the Paulson Institute as well as from Moody’s.