Market Monitor – Market Comment – In the Spotlight

Monday, March 09, 2015
Market Monitor
 Market Comment   —   by Manos Chatzidakis  Investor’s psychology again on the edge. In anticipation of yet another crucial Eurogroup meeting traders mostly held back on Friday, with sellers keeping the upper hand.

General index closed at 850.27 points, shedding 0.85 percent from Thursday’s 857.54 points.

On a weekly basis it lost 3.43 percent. In total 50 stocks expanded, 64 declined and 19 stayed unchanged. Turnover remained low €66.7m following Thursday’s €67.4m.

As there are no expectations for a positive outcome in today’s Eurogroup domestic market should head north and keep a close eye on official statements and reports related to the afternoon meeting.


 In the Spotlight


Greece: Greece could call a referendum or have early elections should its eurozone partners reject its debt and growth plans, Greek Finance Minister Yanis Varoufakis said in a newspaper interview on Sunday. Should Brussels ultimately reject Greece’s proposals, Varoufakis told Italian daily Corriere della Sera: “There could be problems. But, as my prime minister has said, we are not yet glued to our chairs. We can return to elections, call a referendum.”

In a statement released later on Sunday, the Greek Finance Ministry said that Varoufakis was responding to a hypothetical question and that any referendum would “obviously regard the content of reforms and fiscal policy” and not whether to stay in the euro, as Corriere della Sera had suggested.


Greece/Eurogroup: No specific agreement on Greece may be expected at today’s Eurogroup, as Greece’s list of reforms was considered far from complete and needs to be reviewed by the institutions, according to Mr Dijsselbloem. Still, Greece would be hoping for some positive statements that could pave the way for the reinstatement of disbursements to Greece. Specifically, the Eurogroup is expected to start reviewing the framework of 7 reforms sent by FinMin on Friday. The list includes measures for:


¡  The settlement of overdue liabilities to tax authorities and pension funds

¡  Addressing tax evasion through, among others, the mobilization of tourists and students as disguised ‘tax inspectors’

¡  The reorganization of public administration

¡  The provision of 5-year licenses for online betting with the state aiming to raise €3 mn per license

¡  Specific measures on VAT

¡  The conclusion of one or two privatizations such as the sale of the 14 airports and the development of Hellinikon

¡  Merger of the pension funds of professional groups


Greece is targeting a positive assessment that could allow the release of part of the €7.2 bn pending disbursement. Commenting on the list, Mr Dijsselbloem said that the list needs to be reviewed by the institutions in Brussels and by the technical staff in Athens.

In other news on Friday, Greece paid IMF €320mn, corresponding to the first tranche of the €1.5 bn total payment to IMF in March. The state raised from the HFSF an amount of €555 mn corresponding to the dividends paid by the Greek banks on preference shares (Pillar I) in 2013.


PDMA: Greece will auction 1 billion euros of three-month treasury bills on March 11 to refinance a maturing issue, debt agency PDMA said on Friday.


Greece/Budget execution: Tax revenues reportedly reached €3.4 bn in February, at the same level with last year, keeping the Jan-Febr revenue shortfall at €1.0 bn (unchanged from Jan’s shortfall). Specifically, the tax revenues in Jan-Febr reportedly amounted to €7.5 bn vs a target of €8.5 bn.


Banking Sector:  According to press reports after several months of decline in the local credit sector’s creation rate of new bad loans, banks are reporting a sudden rebound in the growth rate in January and February 2015. Estimates by bankers put the amount of new nonperforming loans created in the first couple of months of the year as high as 2 billion euros, which is twice the amount of new NPLs created in the last couple of months of 2014.

This comes as local banks are set to suffer an extra burden adding up to some 1 billion euros from the rise in the cost of liquidity owing to the shift of their funding from the European Central Bank to the emergency liquidity assistance (ELA) mechanism of the Bank of Greece: The former lends cash at an interest rate of 0.05 percent while the latter supplies cash to Greek banks at a rate of 1.55 percent

In other related news ECB is reportedly examining harmonization of national rules on regulatory capital across Europe, which could lead to a reduction in the level of DTA recognized in the banks’ capital. We remind that Greece has passed legislation which allows the conversion of DTA to DTC and the issue of conversion rights in favour of the Greek state. The latter effective means that as of January 1, 2015, any given year’s net loss needs to be counterbalanced by the next year’s profits, otherwise the difference should be covered through a share capital increase and the exercise of conversion rights. Greek banks have recognized c€12 bn of DTC in their capital.


NBG/Astir: Astir Palace Hotel stake sale to Apollo Investment HoldCo canceled as a result of Greek high court ruling to block development plan, Astir Palace co. says in Athens bourse filing.

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