Eurobank Equities: Why investors should reduce their positions in the Athens Stock Exchange

In an international environment of increased economic and geopolitical uncertainties, inflationary pressures, visible recession of the major economies and restrictive policy from the central banks, the common consensus of the international ratings agencies is that the latest upward movement of the shares will hardly be continued, and a defensive investment approach will be the name of the game.

The approach of Eurobank Equities moves along the same wavelength for the Greek stock market, suggesting to investors the outperformance of Greek shares in relation to international markets (+11% for the General Index since mid-June compared to +8% for the European Stoxx 600 index), to “remain defensive, taking some… chips off the table”, at a time when political risk has also increased following the wiretapping scandal.

The assessment of the result of the next election

This means that the basic scenario of Eurobank Equities which argued that based on the dynamics of the parties, during the upcoming electoral contest to be held between autumn 2022 and spring 2023, the new government that would be formed after the second round of elections (as the first round through simple proportionality makes the formation of a government precarious) would probably lead to a coalition government under the ND with PASOK (as a smaller member of the coalition), which would continue the reforms in the economy. However, after the wiretapping scandal that has caused a rift between PASOK and ND, this scenario now has cracks.

Macroeconomic figures

In addition, the macroeconomic fundamentals of the Greek economy are likely to deteriorate in the 4th quarter of 2022 and the 1st quarter of 2023, given the uncertainty surrounding developments related to natural gas flows. If indeed inflation proves persistent, the market will remain susceptible to fluctuations in risk perception arising from the moves of the powerful central banks, the Fed and the ECB. Thus, as Eurobank Equities estimates, investors should take advantage of the recent rally by limiting their exposure to Greek stocks.

As Eurobank Equities prefers stocks with high dividend yields (OPAP, Motor Oil) and stocks with positive earnings dynamics (Mytileneos, refineries) or with limited earnings risk (OPAP), the recommendations end up with OPAP, Mytileneos and Motor Oil as the market’s top picks.