Greek Stocks Rally on Optimism New Democracy Will Win
Greek stocks rallied the most in more than nine months, while a gauge of banks jumped 21 percent, amid speculation that New Democracy, the party that backs an agreed bailout for the nation, may win the June 17 elections.
The Athens Stock Exchange Index (ASE) climbed 10 percent to 550.1 at the close, the biggest jump since Aug. 29, as economists at EFG Eurobank Ergasias SA (EUROB) said Greece is on course to meet its budget-deficit target for 2012. The gauge pared this year’s decline to 19 percent. The FTSE/Athex Banks Index (ASEDTR) soared 23 percent to 224.21 today.
Greeks will vote for a second time in six weeks, after a May 6 ballot failed to result in a government. New Democracy, the largest pro-bailout party, led Syriza, the group opposed to spending cuts, according to the last poll on June 1. Under Greek law, there is a ban on publication of opinion polls two weeks before an election.
“The fact that a vast majority, around 75 percent of Greeks according to polls, prefer to keep the euro, suggests that many of them may think twice before they enter the polling booth,” a team of UBS AG economists led by Martin Lueck in Frankfurt wrote in a report today. “From this angle, even a comfortable Syriza lead in the polls does not necessarily mean that this will be reflected in the election result.”
Today’s increase was the second-best rally for the ASE index since April 1990. The gauge jumped 14 percent on Aug. 29 last year after EFG Eurobank and Alpha Bank (ALPHA) SA announced a merger.
Bwin.Party Digital Entertainment Plc showed New Democracy as odds-on favorite to win the vote. Speculators betting on the party’s victory will get 1.45 pounds, if successful, for each pound of investment, according to the company’s gambling site. Those betting on Syriza will get 2.55 pounds for each pound.
“Uncertainty around Greece will not be removed by Monday morning,” the UBS economists wrote. “A Greek euro exit is far from sure even in the event of a Syriza win, and Greece will in any case remain on drip-feed by the rest of Europe - within or outside of the euro area.”
Alpha Bank rose 30 percent to 1.23 euros. National Bank of Greece SA (ETE) climbed 26 percent to 1.31 euros. Bank of Cyprus gained 12 percent to 27 euro cents. EFG surged 25 percent to 62 cents. Piraeus Bank SA (TPEIR) jumped 25 percent to 27 cents.
Budget data released on June 12 showed Greece’s deficit in the first five months was 2 billion euros ($2.5 billion) below the target for the period. The full-year deficit target is 13.7 billion euros.
“The most recent official data provide some encouragement, despite the ongoing weakness in tax receipts and the continuing accumulation of government arrears,” Eurobank Research economists Platon Monokroussos and Theodoros Stamatiou said in a note distributed today. “Contrary to what many investors appear to believe, the applied austerity program has yielded considerable fiscal results over the last two years.”
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