ASE is due to face rough seas in the coming months
Central banks’ efforts to control the abundant liquidity through interest rate increases are bound to affect stock markets. The Bank of China was the latest addition to the list two days ago, evidently concerned about an overheating of the economy. The possibility of an international oil crisis as a result of a deeper crisis over Iran’s nuclear ambitions is fueling fears of rising inflation rates, even though the international financial and monetary system today is now more experienced in handling crises than in the past. If oil prices had risen to the same levels 20 years ago, the global economy would have been in deep crisis. The differences from the past are also evident in the Greek stock market, which seems to have at least partly incorporated the cooler attitudes of developed markets. The Athens Stock Exchange (ASE) general index has gained about 45 percent from last year – among the strongest performances worldwide. But there is one more index which some analysts are watching systematically – the total capitalization of the stock market in relation to gross domestic product (GDP). Their logic is that the lower this percentage the more likely stock market prices will continue rising. In the last quarter of 2004, ASE’s total capitalization represented 56 percent of GDP; in the first quarter of 2005 it rose to 57.6 percent, in the second quarter to 61.5 percent, in the last quarter of 2005 to 68.3 percent and at the end of last month it was estimated at 76.3 percent. Although the value of a large number of ASE-listed stocks has risen since last year, their circumstances are also different. It is rather misguided to relate many blue chips, which have a heavy influence on the index and draw a large part of their revenue and profits from abroad, to the country’s GDP. In the months ahead, the Greek stock market will dance to the tune of other European markets, which will be anything but tranquil.
