Greek stock market falls 16% after hectic first day of trading

Shares on the Athens stock exchange tumbled after the bourse reopened following a five-week shutdown as new evidence emerged on the damage to Greece’s economy from the country’s debt crisis.

The index was 22.8 per cent down in early trading before recovering a little to be 16 per cent down at 670.26 in mid-afternoon trading. The capital markets committee, the bourse’s watchdog, announced a ban on short-selling.

National Bank of Greece, a benchmark stock, was down 30 per cent – the daily limit – a few minutes after the opening. The banking index covering the largest Greek banks, including Bank of Piraeus, Attica Bank and Eurobank, also hit the volatility limit.

“The banks are especially vulnerable because of capital controls. The question now is whether they’ll drag down the rest of the market with them,” said a Greek analyst who declined to be named.

Lowest reading

The sell-off came as factory production in Greece contracted sharply amid an unprecedented drop in new orders, according to the Markit survey of purchasing managers.

The manufacturing purchasing managers’ index for Greece for July plunged from 46.9 to 30.2, its lowest reading and well below the 50 level that indicates neutral activity. The previous low for manufacturing was February 2012.

July’s survey also signalled the steepest drop in factory employment recorded for Greece during more than 16 years of data collection

Markit economist Phil Smith said manufacturing output collapsed as the debt crisis came to a head.

“Although manufacturing represents only a small proportion of Greece’s total productive output, the sheer magnitude of the downturn sends a worrying signal for the health of the economy as a whole.”

Analysts called the stock market rout a delayed response to the political roller-coaster of the past month: fraught discussions with Brussels and Berlin over a third bailout, the impositions of capital controls and turmoil in the governing Syriza party.

“It’s going to take several days before the market finds stability at lower levels,” one analyst said.

Platon Monokroussos, chief economist at Eurobank, said he expected the economy to shrink by about 2 per cent this year.

“It [the economy] was broadly stable in the first half and tourism has rebounded strongly but if the current uncertainty persists, we’ll see a worse outcome for the full year,” he said.

Bank recapitalisation is on this week’s agenda of talks between Greek finance ministry officials and the so-called quartet of bailout monitors from the European Commission, the IMF, the European Central Bank and the European Stability Mechanism, the EU’s own bailout fund.

Systemic banks

Greece’s four systemic banks are together expected to need between €10 billion and €25 billion in capital from the latest bailout following a flight of deposits and a surge in nonperforming loans as the economy dived back into recession.

Greece and its lenders agreed pension reforms would affect only those who retired after the end of June, labour ministry officials said yesterday.

Lenders want an increase in the retirement age to 67 from the nominal 62 that falls significantly depending on years worked and family status.

“It has been accepted and is not being questioned that all pension rights established by June 30th will not be hurt,” a labour ministry official said.

The bailout, worth up to €86 billion, needs to be settled by August 20th if Greece is to pay off debt of €3.5 billion to the ECB that matures that day.

Finance minister Euclid Tsakalotos will meet Greek lenders' representatives today to discuss setting up a new privatisation fund and bank recapitalisation, a government official said. – (Copyright The Financial Times Limited 2015/Reuters)