Eurobank Equities: The 5 + 1 catalysts that will take off the Greek Stock Exchange

Her Eleftherias Kourtali

Eurobank Equities remains optimistic about the prospects of Greek shares despite yesterday’s strong sell-off and sees a number of factors that will support their valuations in the near future, while expecting further re-rating of bank shares.

More specifically, as Eurobank Equities points out, 2021 was a year full of events, with fluctuations in investors’ perceptions of risk as the initial enthusiasm for vaccine progress was followed by inflation concerns, a shift in central policy (Fed) and the impact of the Omicron variant. As a result, after a return of 12% until mid-May 2021, Greek stocks remained stable for the rest of the year, influenced by the general mood for de-risking and some peculiar “counter winds” (drying of liquidity from fundraising and bond movements publications). Overall, the ATHEX closed the year with a total return of 12%, a somewhat low return in terms of profits of over 20% recorded by several other markets.

As the stock exchange emphasizes, despite yesterday’s sell-off, 2022 started with very good performance for the ATHEX. with investors wanting to increase exposure in Greece. The Greek market also benefited from the general rotation in shares and “value” sectors, as shown by the overperformance of the banking sector, which has gained 9% since the beginning of the year compared to + 2.4% for the market as a whole.

According to Eurobank Equities, the course of the XA in 2022 is likely to be somewhat abnormal, given the more complex policy scenario, rising bond yields and persistent inflation. However, it maintains a rather constructive attitude for the Greek market, given:

1) the positive macroeconomic outlook (GDP 4.5-5% in 2022) which should fuel double-digit growth in EBITDA of non-financial sectors in 2022-23,

2) the growth impetus from the Recovery Fund, which will further strengthen the medium-term development prospects of Greece,

3) very attractive valuations, both in absolute terms and on a relative basis (at 30% the discount of non-bank shares compared to European ones),

4) the low position of investors, and

5) the visible path of Greece towards the investment stage in the next 12-18 months, which is expected to improve the perception of risk for Greek assets.

The banks

In addition, as the stock market points out, the catalyst called the “banking sector” is another powerful weapon for the ATHEX. After a milestone year marked by remarkable progress in consolidating balance sheets, expect the focus to shift to profitability, with the outlook looking quite positive in the view of Eurobank Equities.

As he notes, he expects a number of important positive winds for the industry and in particular: a) the macroeconomic recovery supported by the EU decisions on the Recovery Fund and the ECB, b) the evaluation upgrades, c) the possible resumption of the process privatization for the sector by the HFSF, and (d) international rotation of value-based shares pending higher interest rates. Thus, the stock market maintains a constructive stance for Greek banks, expecting that the sector will be led to a re-rating during the year, given the attractive valuation with the P / TBV index at 0.5x for 2022.

The top picks

In this context, Eurobank Equities expects that fluctuations in risk perception will create several opportunities during the year. Having re-evaluated its top picks, it gives its portfolio a pro-cyclical inclination by adding its share Fourlis.

Overall, at this stage it advises exposure to the following: 1) stocks with high and sustainable dividend yields, with limited effects from cost inflation (e.g. OPAP), 2) policy-related shares offering exposure to the green transition (PPC, Mytilineos), 3) at banks, in view of the normalization of profitability, credit expansion and even more attractive valuation (EIB), and 4) the stories of the reopening of the economy (OPAP, Mytilineos, Motor Oil, Fourlis).