Jefferies: Upgrades bullish stance on Greek Stock Exchange – Sees ‘exceptional value’ in Greek stocks

Her Eleftherias Kourtali

The Athens Stock Exchange has been moving sideways for the last six months, but with 67% of the population fully vaccinated and tourist arrivals in 2021 very close to 2015 levels, the prospects for both the Greek economy and Greek stocks are clearly positive, as Jefferies points out in today’s report where it upgrades its stance on the Greek market from moderate bullish to absolutely bullish. “Greece is doing the best it can,” he points out.

More analytically, as he states, after a period of deflation in 2020, the inflation of Greece (October 3.4%) is moving in the positive direction. The really good news is that the youth unemployment rate has returned below 25% and is heading down to 2008, while Greece has made significant reforms during the pandemic, and all this explains and pushes the upgrade of the attitude towards the Greek shares in bullish.

Greece probably experienced one of the largest upheavals in GDP in 2021, recording an impressive + 16.2% on a quarterly basis in the second quarter. This means that growth will be surprising throughout 2021 and will be at the level of 8% and much higher than the 5% previously predicted by Jefferies, almost offsetting the 2020 contraction.

According to the house, Greece is one of the economies that are most exposed to tourism revenues as a percentage of GDP (~ 19% of GDP in 2019). As Jefferies has pointed out in a previous report, the disbursement of funds from the EU Recovery Fund should help offset the permanent 3% loss of production from the pandemic or the “scars” left by the coronavirus shock.

What is not widely recognized, as he emphasizes, is the level of reforms undertaken by Greece. A series of pension reforms introduced throughout 2015–17 have consolidated the rules on benefits and contributions, removed several distortions and reduced fragmentation and costs. The economy is by no means in perfect condition and the level of debt raises questions about debt sustainability, but the progress that has been made is significant, which strengthens the outlook for the economy and the stock market, according to Jefferies.

“We have noted many times in the past that the Athens Stock Exchange is full of companies that have a domestic franchise with high entry barriers,” the house notes. The scope of the market is decent, although the difference in the return on free cash flow has been limited, he adds.

The basket of Greek shares-survivors created by Jefferies a decade ago and which includes HELEX, OTE, Jumbo and Motor Oil, has exceptional value and is not related to the world stock markets. So she decided to turn her attitude back into bullish in her global portfolio.