Greek stock market bloodbath as exchange reopens

Don Gimbel, global portfolio manager of Geneva Advisors in Chicago – who oversees $9 billion – asks, “Why would anybody want to be invested in a controlled market?”

“There are no buyers”, he said.

Inyoung Hwang and Camila Russo at Bloomberg note that the sharp one-day drop in the Athens market effectively catches Athens up with what’s been happening to the price action for GREK all along.

Trading was suspended in Athens in late June as part of capital controls imposed to stem an outflow of euros that threatened Greece’s banks’ survival and risked pushing the indebted country out of the euro zone. The country’s four biggest lenders – Piraeus, Alpha Bank, the National Bank of Greece, and Eurobank all plunged 30% – the daily limit – immediately after the open.

Shares steadily regained some ground, with the index down less than 19 percent after two hours. Upon opening, the market lost nearly 23 percent.

The letting in the equities market hints at larger problems for the Greek economy.

While Athens closed its stock exchange, the Greece exchange traded fund plunged through the recent financial debt drama.

Banks reopened on July 20 with limited services and restrictions on cash withdrawals still in place while officials worked on rules to resume trading on the stock market after what was its longest halt since the 1970s.

And while Tsipras was able to beat back a revolt against his austerity plan within his own far-left Syriza party last week, his renegade former finance minister, Yanis Varoufakis, continued to scorch the earth between Athens and its creditors.

Traders had been expecting losses on Monday for a number of reasons. There is concern, for example, that negotiations on a new bailout will again become bogged down, leaving the government and banks perilously short of cash.

The reopening of the stock market came after senior EU and International Monetary Fund auditors held their first meetings with Greek ministers to finalise the new three-year bailout for the country that could be worth up to €86 billion (US$94 billion).

The country needs to complete the talks and get more loans before 20 August, when it has to repay more than €3 billion (£2.1bn) to the European Central Bank.

But the European Commission indicated an agreement about payments in August was unlikely, meaning a new bridge loan would be necessary. The overall banking index also fell to its 30 percent limit.

Similarly, Greeks themselves will be severely restricted in what they can do. Compounding the pessimistic outlook is the Greece economic sentiment – it hit the lowest since October 2012.

“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.

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