Stock market bets

Of Eleftheria Kourtali

The cheap valuations of Greek stocks, the impressive course and resilience of the profitability of Greek listed companies, the strong performance and prospects of the Greek economy and the great comeback of Greek banks were the signal for the great return of strong investors on the Athens Stock Exchange. last week proved without a doubt. The foreign funds, which kept a wait-and-see attitude, especially in the second half of 2021, are now clearly betting on the January phenomenon, the well-known January Effect, completely confirming the estimates that existed at the end of last year that X’s recovery trade bet. A., which was initially estimated to happen in 2021, is transferred to 2022. The jump in turnover and returns in many parts of the dashboard sent the General Index to a high of 7 years and a few … meters before reaching 1,000 points .

January Effect launches ATHEX

According to the January Effect “definition”, if the market “rises” in the first month of the year, then the rest of the year will be bullish and, if it falls, then the rest of the year will be bearish. In short, the first month of the year, and especially the first meetings, tend to indicate the trend of the year, although analysts point out that, in order for any sustainable rise in stocks, we need the help of profitability and growth. After an effort that found a wall in January 2020, when in the middle of the month the international coronavirus outbreak had already begun to cause intense turmoil in world markets, the Greek Stock Exchange seems ready to confirm this tradition this year, as the ground is already properly paved.

Although we are still in the middle of the month, the ATHEX has already stood out internationally with its performances, having in many meetings become autonomous compared to other markets, with many titles having covered the losses of the two years of the pandemic. In fact, the vast majority of General Index securities record profits from the beginning of the year but also compared to the beginning of 2021. At the same time, with profits close to 8% and about 70 points higher than the end of December, the ATHEX. has the highest returns internationally after the Istanbul Stock Exchange, which is in first place with gains of over 12%. If the current momentum continues, then January 2022 will be “comfortably” the landmark month where the ATHEX. recovered 1,000 units for the first time since December 2014.

It is worth noting that in fact the January Effect has to appear on the Greek Stock Exchange, although it was not so strong, from 2019, when the General Index closed in January with gains of 3.5%, while throughout the year the ATHEX. was in the first places internationally, having jumped by 50% with a “driver” of + 100% of the banking index. According to market participants, a similar ground seems to be paved on the ATHEX. again this year, with the difference that the banks are in a significantly better position and have much stronger prospects. In 2020 and 2021 the first month of the year was declining. Depending on the profits of the General Index so far this year, they were recorded in January 2013, with the ATHEX. to be strengthened by 8.7%. In the period 2014-2017, the first month of the year was negative for Greek shares.

Entry of strong new funds

From the first meetings of the year, and especially those of the last week, it has been seen that the investment interest has returned sharper, with the inflows of funds jumping to more than double the level on a daily basis compared to the previous period. The daily transactions are over 100 million euros, with market participants noting that new and old codes that have awakened are leading this wave of placements.

The slowdown in trading activity in the past period proved to be temporary, due to the previous wave of stock and bond issues that absorbed market liquidity, as well as new concerns about the pandemic and inflation, which led many investors to take a stand. waiting.

At the dawn of the new year things have clearly changed. Investors see that the Greek economy moved at a strong pace in 2021 and over the next two years will grow above the trend, thanks to the funds of the Recovery Fund. The banking industry this year will mark a major milestone, the single-digit levels of NPEs, and is leading with rapid steps towards normalization and regularity. As the rating agency Fitch pointed out, the prospects of Greek banks for 2022 are clearly improved, thanks to the economic recovery and the reduction of NPEs, with economic growth and the consolidation of their balance sheets to continue to support its business environment. industry. At the same time, the funds of the Recovery Fund will strengthen the economic activity, further helping to improve the prospects of the sector.

According to analysts, the increase in turnover on the ATHEX is an important element, as, in addition to signaling the increased investment interest, it helps to “consolidate” along with the upward trend. The domestic economic recovery, they estimate, leads to increased trading activity on the ATHEX, as some of the existing companies will grow, while a possible new wave of imports may increase the attractiveness of the market. The funds of the Recovery Fund, as they report, are expected to bring significant benefits to the Greek economy in the long run, while it is also expected to increase the disbursement of loans to companies, along with the mobilization of resources for private investment. In any case, as they point out, given the high volatility and the risk involved as an “emerging market”, profit-making moves at critical technical levels can not be ruled out.

After a long time, the ATHEX moves. are characterized by autonomy and not by synchronization with the international markets, as commented by Dimitris Tzanas of Kiklos Securities, with the transactions improving, as strong investors are placed in Greek securities at the beginning of the year and with the buying interest to be extended to other index securities. with attractive valuation and promising prospects for increasing their sizes in the new year.

The banking sector is leading the upward movement of the DG, as the investment houses agree in the assessment that higher target prices of the shares of the systemic banks are justified. Indeed, he points out, for three reasons, banks can record strong profitability in 2022 that will allow some to distribute a dividend: the ratio of NPEs to total loan portfolios will be in single digits for all by 2022, the indicators capital adequacy will convince of their solvency and credit expansion will be large, fueling increased operating profitability.

Banks guide the positive story

The shares of Greek banks have outperformed, with the industry index already recording double-digit growth rates since the beginning of the year, moving to two-year highs. From last November-December, international and domestic analysts underlined through their reports that the valuations of Greek banks are low and a re-rating is expected this year. As HSBC pointed out in a new report last week, which remains a bull for Greek stocks, banking stocks and the prospects of the banking sector are a key point of the overweight position it holds for Greece as a whole. Banks represent 35% of the FTSE Greece, as it states, with the P / E being at 6.5x for 2021 and at 6.6x for 2022, while the P / B index for both years is 0, 45x. The discount against European banks is around 40%, despite the fact that the return on ROTE equity is at similar levels.

The reduction of NPEs and the sale of assets will lead to a significantly improved capital position of the banks, as he emphasizes, while the utilization of the Recovery Fund could lead to a strong increase of new loans and the economic recovery will also allow consumption and tourism. to recover significantly. For all these reasons, HSBC points out that it gives a “Buy” rating to all four systemic Greek banks.

For all Greek stocks, HSBC emphasizes that, thanks to the rapid cyclical recovery, the Greek market valuation / earnings ratio looks attractive – with a P / E significantly lower than that of emerging markets, but at a faster pace. increase profits. Also, the yield on Greek bonds is very low compared to most other bonds in emerging markets, which is an additional support for the valuations of Greek shares, he adds.

An additional catalyst is the prospects for strengthening liquidity on the ATHEX, the British bank emphasizes, noting that the average fund of global emerging markets has a neutral position in Greece. Recently, however, investment interest in Greek stocks has also been low, suggesting that there is plenty of room for liquidity support.

Impressive profitability

An important “magnet” for the funds is the durability of the profitability of the Greek listed companies. The results of the third quarter of 2021, pending the results of the year 2021, are very supportive of the valuations. According to Beta Securities, the 124 companies in the commercial and industrial sector showed a marginal decrease in turnover -3% and an increase in operating profits by 10% compared to 2019. However, the figures, compared to 2020, create dizziness: 25% increase in turnover and 57% in operating profit, rates unprecedented in any overall publication of results for any period of time.

In the stock market, the fiscal year 2021 will be a year of total recovery for the results, as, in addition to increasing the return on individual capital, there are significant improvements in the capital structure of the balance sheets. At the same time, many listed companies continue to distribute cash to their shareholders, thus building a good reward delivery as a result of their performance.

It is characteristic that Citigroup has once again improved its forecasts for the valuations of Greek shares, with the estimated increase in the profitability of Greek listed companies being placed even higher. More specifically, he now sees that earnings per share are expected to jump by 41.4% this year (including banks), from an increase of 25% previously forecast, which is the highest rate internationally for 2022. In 2023 he expects an increase of 19.9% ​​in Greek EPS. By comparison, the profitability of European companies is estimated to increase in 622 by 6.2%, of emerging markets by 5.4%, of developed countries by 7.8% and of American companies by 7.9%, while on average internationally the increase in profitability will be 7.4%.

According to HSBC, the increase in the profitability of Greek listed companies participating in the FTSE Greece index is set at 15.4% for 2022, while it estimates that in 2021 they recorded one of the highest increases internationally, as the increase in earnings per share (EPS) is placed at the impressive 180%. By comparison, the European emerging market index is set at 8% this year, while in 2021 it is estimated at 90.8% and, in terms of European stocks, the growth of EPS is expected to move to 5.5% this year, compared to + 65% in 2021.