Euroxx: The strong catalysts of the Stock Exchange – Well over 1,000 points the General Index coming soon

Her Eleftherias Kourtali

Greek stocks started relatively well in 2022, having gained gains of 6% and outperforming global markets. Euroxx believes that, despite the increased short-term geopolitical risks, there are strong underlying reasons why this outperformance could continue further, with the Overall Index well above 1,000 points in the near future. In her view, the main levers that will determine the performance of the Greek economy and the Greek stock market for the rest of 2022 are the following:

The favorable macroeconomic environment. The macroeconomic environment remains very supportive for Greek stocks, based on the progressive return to normal conditions in terms of the health front, the allocation of funds from the Recovery Fund, the recovery of domestic demand, the continuous institutional support and the restrained politicians. risks (no early general elections are expected this year). The positive key macroeconomic scenario of Euroxx strengthens the growth of corporate profits, thus supporting the valuations of Greek shares and providing support to potential pressures.

A second important supporting factor for Greek shares is the way to reach the investment level for Greece. The government expects this milestone to be reached in early 2023, but according to market participants it could be possible by the end of this year. Along with the exit from the framework of enhanced supervision, the stock exchange expects that the upgrade of the creditworthiness of Greece by the companies will lead to a re-rating of the Greek shares and their re-inclusion in the developed market indices, which will undoubtedly be a positive catalyst for the ATHEX yields

The third important catalyst is the new era in which Greek banks are entering after the reduction of NPEs. No longer restricted by inheritance risks like their old NPEs, and with the support of the NGEU’s ample liquidity and capital, Greek banks now appear ready to lead the economic recovery through credit expansion, which along with its accelerating asset quality will allow the industry to make an impressive progress in the long run

In the near future, according to Euroxx, facilitating global policies, a strong outlook for domestic GDP and corporate profits and non-demanding valuations will help Greek stocks outperform global stocks in the coming months. Overall, he believes that corporate fundamentals remain strong enough to offset the negative impact of higher interest rates and geopolitical risks and expects further stock gains with the General Index well above the 1,000-point mark by the end of the year.

In this context, the stock market also believes that the current growth environment above the trend, higher inflation and a modest increase in bond yields should favor “value” stocks over “growth” stocks and advises investors to focus on higher quality shares within the “value” trade.

Overall, in the basic Euroxx scenario, ie excluding a possible new wave of the pandemic, increased (above estimates) inflation and energy prices, as well as extreme geopolitical tensions, Greek stocks offer an attractive medium-term performance outlook. On a sectoral basis, it sees particularly upward margins for selected higher quality stocks, such as energy, banking and commodities, along with services sector stocks that will benefit most from the opening up of the economy.

The top-picks

Euroxx top-picks include companies that, in its view, continue to offer the best exposure in the promising energy sector (Mytilineos, Terna Energy), covering important issues such as the Energy Transition and the development of RES. It still includes in its top picks a stock with high liquidity, with good fundamentals, strong cash flows and sustainable dividends (OPAP)while this year also chooses a quality stock, with significant upside margins in NAV terms (Lamda Development).

Regarding banks, remains positive for the industry and believes that further re-rating can take place, even in an environment of rising bond yields and future interest rate hikes by the ECB. Therefore, it includes all Greek banks in the list of top options for different reasons, as it believes that the specific characteristics of each bank are reflected in the relevant valuation.