This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.nytimes.com/2015/08/04/business/dealbook/athens-stock-exchange-greece.html

The article has changed 7 times. There is an RSS feed of changes available.

Version 5 Version 6
Stocks Plunge in Greece as Athens Exchange Reopens Stocks Plunge in Greece as Athens Exchange Reopens
(about 4 hours later)
ATHENS — Investors issued a vote of no confidence in Greece’s economy on Monday, dumping stocks as trading on the Athens exchange resumed for the first time in five weeks. ATHENS — Investors issued a vote of no confidence in Greece’s economy on Monday, dumping stocks as trading on the Athens exchange resumed for the first time in five weeks.
A plunge of more than 16 percent for the main Greek index and a 30 percent sell-off for bank stocks were the latest signs of Greece’s shattered economy. But the resumption of trading was a necessary step as Greece tries to emerge from controls on financial activity that the government, confronted with a bank run, imposed at the end of June.A plunge of more than 16 percent for the main Greek index and a 30 percent sell-off for bank stocks were the latest signs of Greece’s shattered economy. But the resumption of trading was a necessary step as Greece tries to emerge from controls on financial activity that the government, confronted with a bank run, imposed at the end of June.
Analysts said stock prices could begin to recover in the weeks to come, bringing much-needed capital into the country, as investors with an appetite for risk look for bargains.Analysts said stock prices could begin to recover in the weeks to come, bringing much-needed capital into the country, as investors with an appetite for risk look for bargains.
In yet another sign of trouble, though, new survey data on Monday showed a fall in Greek manufacturing activity since the government imposed controls in late June on the flow of money out of Greece.In yet another sign of trouble, though, new survey data on Monday showed a fall in Greek manufacturing activity since the government imposed controls in late June on the flow of money out of Greece.
Much depends on the outcome of negotiations between government officials and representatives of the country’s international creditors on a multibillion-euro bailout, Greece’s third in five years. The talks entered a second week on Monday.Much depends on the outcome of negotiations between government officials and representatives of the country’s international creditors on a multibillion-euro bailout, Greece’s third in five years. The talks entered a second week on Monday.
“If the new deal with creditors is struck and ratified, Greek stocks could rebound nicely,” Holger Schmieding, chief economist at Berenberg Bank, said in an email. “And if the deal then actually holds, with Greece implementing the structural reforms demanded by creditors, Greece could recover strongly.”“If the new deal with creditors is struck and ratified, Greek stocks could rebound nicely,” Holger Schmieding, chief economist at Berenberg Bank, said in an email. “And if the deal then actually holds, with Greece implementing the structural reforms demanded by creditors, Greece could recover strongly.”
He added: “That is a big if.”He added: “That is a big if.”
After initial talks with foreign envoys on Friday that focused on Greece’s finances, privatization of public assets and bank recapitalization, Finance Minister Euclid Tsakalotos said that “there was convergence on some points, less on others.”After initial talks with foreign envoys on Friday that focused on Greece’s finances, privatization of public assets and bank recapitalization, Finance Minister Euclid Tsakalotos said that “there was convergence on some points, less on others.”
The stock exchange had been closed since the end of June, when the government also shut banks in an effort to prevent more money leaving the country after the collapse of talks with the creditors. Banks reopened on July 20, but restrictions on money transfers and withdrawals remain in force. The stock exchange had been closed since the end of June, when the government also shut banks in an effort to prevent more money from leaving the country after talks with creditors collapsed. Banks reopened on July 20, but restrictions on money transfers and withdrawals remain in force.
The resumption of trading in Athens was intended to be another step toward normalcy, but instead, investors used the opportunity to flee exposure to the Greek economy.The resumption of trading in Athens was intended to be another step toward normalcy, but instead, investors used the opportunity to flee exposure to the Greek economy.
Shares on the exchange initially dropped nearly 23 percent as trading began on Monday, with bank stocks leading the rout. While the main index recovered somewhat by the end of trading, bank shares did not. They might have fallen even more on Monday, but selling was halted after the declines reached 30 percent, in accordance with Athens stock exchange rules.Shares on the exchange initially dropped nearly 23 percent as trading began on Monday, with bank stocks leading the rout. While the main index recovered somewhat by the end of trading, bank shares did not. They might have fallen even more on Monday, but selling was halted after the declines reached 30 percent, in accordance with Athens stock exchange rules.
Banking has been among the hardest-hit sectors of the Greek economy, and lenders are dependent on emergency cash from the European Central Bank to stay afloat.Banking has been among the hardest-hit sectors of the Greek economy, and lenders are dependent on emergency cash from the European Central Bank to stay afloat.
Greek shares recovered slightly by closing and were down 16 percent, but the initial price declines showed that most investors were not yet willing to bet on the country again.Greek shares recovered slightly by closing and were down 16 percent, but the initial price declines showed that most investors were not yet willing to bet on the country again.
Bank stocks “will fall quite a bit more and will take a while to rebound,” said Nikos Pantelakis, chief executive of Pantelakis Securities, an Athens brokerage firm.Bank stocks “will fall quite a bit more and will take a while to rebound,” said Nikos Pantelakis, chief executive of Pantelakis Securities, an Athens brokerage firm.
Mr. Pantelakis said that shares of companies outside the financial industry, like the telecom company OTE, Aegean Airlines or the betting firm OPAP “will recover faster.”Mr. Pantelakis said that shares of companies outside the financial industry, like the telecom company OTE, Aegean Airlines or the betting firm OPAP “will recover faster.”
European markets, increasingly confident that the turmoil in Greece will not be transmitted to global investors, shrugged off the drop in shares and were trading up slightly on Monday.
Stock markets are one of the main ways for companies to raise money to expand and grow, and they are thus a crucial component of a healthy economy. They are also a barometer of investor confidence.
The new survey data on Monday underlined how much damage the Greek economy has suffered because of a lack of fully functioning banks and financial markets.
A survey of Greek purchasing managers by Markit, a research firm, indicated that manufacturing activity had plummeted since the restrictions began. On a scale of 100, the Markit index of manufacturing sentiment in Greece plunged nearly 20 points to the lowest level since the survey began 16 years ago. One reason for the decline was that manufacturing companies had trouble buying components and raw materials from abroad because of restrictions on money transfers, Markit said.
Greek shares were among the best-performing in Europe in 2013 and early 2014, as investors concluded that the country’s economy had hit bottom and stocks in Greek companies were cheap. Wilbur L. Ross Jr., the American billionaire known for risking money on distressed assets, led a group of foreign investors who last year put 1.3 billion euros, or about $1.4 billion, into Eurobank Ergasias, the third-largest commercial bank in Greece, after National Bank of Greece and Piraeus Bank.
But stocks in Greece began to fall again last year after the government started to back away from conditions demanded by creditors in return for financial aid. The estrangement began under the previous government led by Prime Minister Antonis Samaras and sharpened after Alexis Tsipras, leader of the left-wing Syriza party, took office in January.
Mr. Schmieding of Berenberg Bank said that if the stock exchange had remained open during the last month, shares might well have fallen temporarily to levels even lower than those seen on Monday. “We would have seen a lot of volatility with much lower lows in the meantime,” he said.
“Closing the stock market arguably did not add much to the damage that Tsipras/Varoufakis had done anyhow,” Mr. Schmieding said, referring to the prime minister and to Yanis Varoufakis, the Greek finance minister who resigned last month.
Greece and its creditors have been wrangling for months over the terms of its latest proposed financial rescue. Greece needs to secure new loans by Aug. 20 when a €3.2 billion debt repayment to the European Central Bank comes due. If it does not make the payment, the central bank will be forced to cut off financing for Greek banks, provoking another crisis.
The Syriza party, which leads the governing coalition, is already deeply divided over the prospects of yet more tough conditions demanded by creditors. Mr. Tsipras managed to head off a revolt in his party last week. But party dissidents are expected to break ranks with him when a new deal, or any new austerity measures, are put to a vote in Parliament in the coming weeks. The political upheaval has fueled speculation of snap elections as early as September.
The Athens exchange, which has lost nearly 90 percent of its value since before the global financial crisis in 2008, has suffered sharp declines before. In December, when the Samaras government announced steps that would pave the way for new elections, shares fell by nearly 13 percent as investors anticipated the country’s shift to the left.
Ben Ritchie, senior investment manager at Aberdeen Asset Management in Edinburgh, said investors were not likely to begin buying Greek shares again until a new deal was worked out with creditors.
“We need to see the bailout plan formally approved and finalized. We need to see the government executing on that plan,” Mr. Ritchie said. “That will give investors confidence.”