The Greek stock market very likely represents an emerging opportunity, as many stocks are sporting extremely low valuations these days. However, when we last discussed the Greek market, we pointed out that there was probably no hurry and more importantly, that using ETFs to play the Greek market would pose a difficulty at the current juncture.
Greek ruins – emblematic for the country's situation.
Photo credit: fondos7.net
As we noted at the time:
“[…] at least one of the larger banks is reportedly in serious trouble. In any case, non-performing loans in the Greek banking system have recently streaked to a new record high, in parallel with the run on deposits. So the banks are certainly not healthy, in spite of having been recapitalized at great cost late last year and remaining in the ECB's good graces for now.
This makes a bit more tricky to play Greece via ETFs or similar index-tracker vehicles, all of which are certain to contain bank stocks as well. To be safe, one should probably wait for the upcoming verdict on the banking system situation, which is bound to become known soon.”
(emphasis added)
This morning the stock exchange in Athens reopened, and the Athens General Index ended the day more than 15% down (after initially plunging by almost 25%).
The Athens General Index (ATG) crashes upon the exchange's reopening, but actually manages to close above its previous lows – click to enlarge.
The culprit was indeed bank stocks. In spite of having already declined quite a bit, banks still represent about 20% of the index. This is a parallel to the stock market in Cyprus, which also got clobbered very badly due to its banking components. Three of the five largest bank stocks in Athens declined by 30%, this morning and were thus “limit down”. For example, National Bank of Greece ended at 82 cents/share on Monday, after trading at €1.20 prior to the suspension of trading at the end of June. An estimated €100 million in sell orders reportedly went unfilled, so there is presumably room for additional declines on Tuesday.
