Eurobank Equities: Investment opportunity correction in the markets – Greek stocks remain an impressive story

Her Eleftherias Kourtali

Markets are likely to fluctuate considerably over the next two weeks, with data on the effectiveness of the Omicron vaccine being the main “lever”, as Eurobank Equities points out. However, he estimates that any correction is a significant investment opportunity for the ATHEX. as the valuations of Greek shares are attractive and continue to be an impressive story.

More analytically, as the stock exchange notes, after a period of enthusiasm in the beginning and middle of 2021, supported by the availability of vaccines and corporate profits as well as the macroeconomic environment, the momentum in Greek stocks has recently declined with the General Index report fell 4% in the last month (compared to -2% for the Stoxx 600) after Friday’s sell-off caused by the Omicron variant. This development has intensified concerns about stagnant inflation and the decline in the appetite for risk in view of the COVID outbreak observed in recent weeks, which are already “burdening” the Greek stock market in the second half. These have left the ATHEX with a yield of 8% since the beginning of the year until today (compared to 20% for EU shares), points out Eurobank Equities.

Concerns about COVID have grown internationally in the light of the new Omicron variant. Internally, cases remain close to record levels, as is the case with deaths, while the pressure on the health system increases (ICF completeness> 90%). The government has recently strengthened restrictions on unvaccinated citizens in many places (including bars, restaurants, theaters, etc.), while making some social activities more expensive for those who have not been vaccinated (eg mandatory COVID test) for access to retail stores). The latest wave seems to be more serious than the previous ones, which was natural to happen during the stock market, as the government has raised the bar for social distance restrictions due to the availability of vaccines.

Regarding the latter, vaccination rates in Greece remain somewhat lower than in other EU countries (eg Spain, Italy) and this raises some concerns as to the extent to which the government may continue to treat the COVID wave simply by targeting only unvaccinated individuals. The appearance of Omicron, as Eurobank Equities points out, adds another source of concern, given the early indications of higher transferability from Delta. The key question here is the effectiveness of existing vaccines against the new variant, which will take a few weeks to measure. With this in mind, the risks of wider government restrictions are certainly not negligible, despite assurances from government officials that there will be no national restrictions. The stock exchange estimates that a complete “closure” of the economy for two weeks, would cost 1-1.2 billion euros, translated into a slowdown of 0.6-0.7% of GDP.

Reasons for optimism for 2022

With Greek GDP expected to grow by 7-8% in 2021 and around 4.5-5% in 2022, the general framework seems quite supportive for Greek stocks, despite the internationally known challenges, as Eurobank Equities points out. He estimates that this will “translate” into a 14% increase in operating profits in non-financial sectors next year, after 10% in 2021, making Greece a market “driven by the profitability of listed companies” and not just a case of re- rating.

Regarding the re-rating, the Greek shares (both banking and non-banking) are traded at attractive valuations, specifically with a 25-30% discount against the shares of the EU or the region, making the relevant story quite impressive. . On an absolute basis, the shares of ATHEX outside the banking sector are trading at levels commensurate with their long-term history, but this is based on the multi-year growth cycle that will be brought by the impetus from the Recovery Fund (4-5% by 2023), as Eurobank Equities points out.

In terms of the stock market, the markets are likely to fluctuate considerably over the next two weeks, with data on the effectiveness of the Omicron vaccine being the main “lever”. With Moderna optimistic that a reformed vaccine – if needed – could be ready early next year, Eurobank Equities estimates that any possible correction should be considered as providing a strong entry point.

The top picks

At this stage, the stock exchange proposes the report as follows: 1) shares with high and sustainable dividend yields, with limited effects from cost inflation (eg OPAP), 2) shares related to the policy they offer report on the green transition (PPC, Mytilineos), 3) to the banks, in view of the “big liquidation” by the NPEs, the credit expansion and the still attractive valuation (EIB) and 4) to the stories of the reopening of the economy and to the cyclical sectors ( OPAP, Mytilineos, Motor Oil).