Athens Stock Exchange: Sees government normality soon

The elections of May 21 for Greece finally brought closer a return to governmental normality, a scenario that, as already assessed, is positive for the Greek stock market and bonds. The possibility of a second election may still have a high chance, but the market sees the scenario of an unstable government now having a marginal chance from these polls.

Fueling an upward trend

Throughout the pre-election period, ATHEX showed that it had the “fuel” to sustain a sideways upward movement, reaching 105-month highs just before the polls opened. And this “fuel” may have had the seal of positive corporate results, but the political risk was by no means negligible.

As a negative scenario was that election result that would lead to political ambiguity. And this because it would delay, if not cancel, the much-desired recovery of the investment grade, and therefore the front runners of this scenario. Also negative would be a scenario of a special purpose government, or a government with a marginal majority or a minority with tolerance.

One party government

However, after the great lead of the New Democracy party, now comes the scenario of an independent government in the second elections, which will take place with the enhanced proportional system, is the dominant one. After all, the market’s consensus estimates wanted the ruling party leading by a margin of 4.5%-6% over the runner-up, with the polls bringing in 20%.

As ING recently pointed out, knowing that he will benefit from the staggered majority bonus, Prime Minister Kyriakos Mitsotakis may aim to form a government in a second round of elections, which will likely be held in early July. And this scenario has no risk for Greek assets.

After all, the Greek economy is doing well, helped by tourism, while inflation continues to slow down. ND can capitalize on all of this during a hypothetical short election campaign in June, pitting stability against potential calls for change coming from SYRIZA. Overall, ING has indicated that markets do not appear to be concerned.

Higher levels

However, if the above is confirmed, the market sees higher levels, with the first target being 1,250 units. The turnover with which any escape will be achieved will also be of interest as it will provide information on the intensity of the prevailing trend and the possible level of relaxation.

At the same time, it is possible to cultivate new expectations for Fitch’s rating on June 9, which although it will be in the middle of a pre-election period, a predetermined result may also bring surprise on the upgrade front. After all, markets and analysts, as they have shown throughout the years, want… stability.