Trading on the Athens Stock Exchange was suspended in late June as a capital controls measure to manage the staggering outflows from the economy, which threatened a collapse of the Greek banking system. Greek banks had also been closed for three weeks, however they reopened on 20 July.
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Separately Monday, data showed that the Greek Purchasing Managers Index fell to 30.2 for the month of July, the lowest level recorded in the series’ 16-year history.
Traders had predicted sharp losses as a result of pent-up trading. The Greek banking index was also sold down to the volatility limit within minutes. “The possibility of seeing even a single share rise in [today’s] session is nearly zero” said Takis Zamanis chief trader at Beta Securities. Markets in the remainder of Europe, nevertheless, have been largely unaffected.
“It’s very important that we’re opening, of course we expect pressure on the Greek stock market but we’ll be there to monitor what happens”.
The Athens Stock Exchange has fallen by about 23 percent as trading resumes after a five-week closure. Restrictions have been put in place to stem capital flight, however. “But for a true indication of investor appetite we should look at bond markets”, he said.
The country’s four main banks, including the National Bank of Greece, were down by around 30%. Currently, it is not possible to transfer money from local bank accounts for buying shares.
Banks have since reopened, while maintaining strict withdrawal limits.
In response, anxious Greeks rushed to withdraw cash from ATMs, prompting the government to impose capital controls from June 29 and announce the closure of the country’s banks and the stock exchange. Greece’s new $96 billion bailout plan includes 25 billion euros ($26.7 billion) to recapitalize the banks. Therefore, Greek banks played a major role in pulling the index down today.
The Greek stock market is about to reopen for the first time in five weeks. “It will take some days for the market to balance out”. So, why the doom and gloom in the stock market? The government was forced to close both after an global bailout loan program ended – leaving Greece on the verge of a eurozone exit.
The sources said the untapped emergency liquidity assistance (ELA) buffer had grown to about 5 billion euros from 1 to 2 billion euros at the height of Greece’s debt crisis, helped by tax and tourism inflows, and pension payments.
The global Monetary Fund (IMF) dropped a bombshell last week when it said that it would not take part in a deal without debt relief for Greece, which Germany remains firmly against.
Against such an uncertain backdrop, analyst Hewson pointed out that Greece still faced an uphill struggle.
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fearS that existing shareholders could see their holdings diluted given banks’ need to recapitalise were also keeping buyers at bay, traders said.
