The stock market of Greece suffered big losses on August 3, crashing almost 23 percent before easing to settle at 17 percent. This happened after the shut down that lasted for five weeks brought on by fears of the country being ejected from the EU.
Banking stocks fared the worst in the markets, with Eurobank Ergasias, National Bank of Greece, Alpha Bank, Bank of Piraeus and Attica Bank all trading below or at 30 percent lows. Similar losses were felt in other sectors too. A fund manager has described the sell off as “herd behavior”. A few people continued to buy stocks.
The principal Athens stock index went down 18 percent during mid-day trading post the initial plunge. In contrast, the FTSEurofirst 300 index rose slightly. The Greek economy showed bad news too, with figures for flash manufacturing PMI for July decreased to 30.2 - a reading considered to be the lowest from the time Markit began to compile data (2009). Compounding the pessimistic outlook is the Greece economic sentiment - it hit the lowest since October 2012. The main reasons for this, according to IOBE, are a potent mix of political uncertainty and capital controls. Traders were therefore anticipating a day of volatility and losses.
Up and restrict
A few companies, in contrast, outperformed. These companies had significant exposures abroad. The telecoms operator OTE, aluminum producer Mytilneos and a number of other export oriented companies saw the easing of their losses. Analysts have opined that non-financial companies will perform better compared to banks, as their prospects are much better and they are also much less exposed to the vagaries of the domestic market.
Kostos Botopoulos, Chairman of Hellenic Capital Markets Commission, had said that his organization will monitor markets very closely on August 3. He said that the Commission are supervisors and not participants and is observing the market. He assured that the state will not intervene in the workings of the market, but will see the price at which the market will stabilize. It will also see the views of both foreign and domestic investors.
For Greeks, finance is very much restricted. The ECB and the Greek Government have issued orders that no additional money could be withdrawn from the deposit accounts to purchase shares. This is being done to stop any possibility of utilizing shares to buy more euros. According to the European Commission, the economy of Greece may shrink up to four percent in 2015.