Rowan Dartington’s investment director Tim Cockerill comments on Greek stock markets reopening and the country’s economic outlook.
The Greek stock market opened for the first time in five weeks this morning. It was not a pretty sight. At the time of writing the Athens Stock Exchange (ASE) had fallen by -23.0%, the largest one-day fall in its history. Unsurprisingly, the largest losses were found in the banking sector. Piraeus Bank, the National Bank of Greece and Alpha Bank all found themselves -30.0% lower at the open, the daily limit for Greek shares.
Whilst the size of the decline is eye opening, it wasn’t unexpected; traders were bracing themselves for a day of extreme losses and volatility. Their concerns have been proven accurate and the ASE now finds itself at its lowest level since 2012.
Further bad news arrived in the form of a manufacturing survey (the Purchasing Managers’ Index) for July. The index, which measures productivity in the sector, slumped to its lowest ever recording of 30.2 (anything above 50 indicates expansion).
According to Markit, the company who compiles the data, Greek factories “faced a record drop in new orders and were often unable to acquire the inputs they needed, particularly from abroad, as bank closures and capital restrictions badly hampered normal business activity”. In essence, the Greek manufacturing sector has collapsed in recent months and the sheer magnitude of the decline is particularly worrying.