Kostas Tsironis/Bloomberg

Greek Financial Markets to Reopen After Five-Week Shutdown

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Greece’s financial markets will reopen on Monday, ending a five-week suspension that began after the country imposed capital controls amid a confrontation with creditors.

Greek traders will be able to buy stocks, bonds, derivatives and warrants only if they use new money such as funds transferred from abroad, cash-only deposits, money earned from the future sale of shares or from existing investment account balances held at Greek brokerages, the Finance Ministry said in a decree on Friday. Foreign investors will be excluded from all restrictions, provided that they were already active in trading before the imposition of capital controls last month.

The resumption will end the longest interruption to trading in the Athens Stock Exchange since the 1970s. The shutdown was enacted as Greece attempted to shield its financial system from ruin as it fought austerity measures sought by European lenders. Local investors have been without prices in the $41 billion equity market since June 26 as the bourse remained closed even after banks reopened with limited services on July 20.

“I think the markets opening is another small positive sign that conditions are normalizing in Europe,” said Jason Benowitz, a New York-based senior portfolio manager at Roosevelt Investment Group Inc. “In Europe overall, we’re starting to see signs of life and QE beginning to have an impact. Greece’s last-minute negotiations and referendum put a pause in the healing, and now it can resume.”

Markets Closed

For the first three days of the exchange’s reopening, trading in a stock will be halted if it rises or falls by as much as 7 percent in 10 minutes, the Athens bourse said. That’s down from the previous limit move of 10 percent in five minutes.

Capital controls in place since June 28 have restricted the functioning of the economy, with Greece set to be the only euro-area nation to shrink this year. The controls and a shutdown of lenders came after Greek Prime Minister Alexis Tsipras ended talks with creditors on a bailout to hold a referendum. He then reversed course and agreed to implement prior actions required to enter a deal on funding.

The Greek economy has shrunk for two straight quarters and may contract as much as 4 percent this year, according to a July 29 report from the parliamentary budget office. It estimates the controls cost the economy between 4 billion euros ($4.4 billion) and 10 billion euros. That compares with 2014 output of 179.1 billion euros.

Favoring Sales

Rules outlined by the Finance Ministry could result in a “loss of confidence to the market mechanism and integrity” by making it easier to sell securities than buy them, according to the Association of the Members of the Athens Exchanges.

“The restrictions imposed only on the transactions of purchase of securities, while leaving the transactions of sales free and unrestricted, will clearly favor the sales rather than the purchases of financial instruments,” the group said in an e-mailed statement.

Greek stocks had been enjoying a rebound of sorts when trading was suspended on the eve of the June 29 open. The benchmark ASE Index surged 16 percent in the week leading up to the closure, after dropping 18 percent in the previous four.

While no share has changed hands on the exchange for five weeks, investors haven’t been without ways of betting on what will happen when they resume.

Greek ETF

An exchange-traded fund listed in the U.S., the Global X FTSE Greece 20, has continued to trade, serving as an instrument for pure speculation in the absence of local prices.

That security has fallen in four of the last five weeks and closed on Thursday down 19 percent since the last day the Athens market was open. Daily volume in the ETF has averaged more than 2.2 million shares, almost twice the rate in the month before the closure.

The ETF may not be a perfect predictor of where equities in Greece will end up. When Cairo’s exchange was closed for almost two months in 2011 during the Arab Spring uprising, traders used the Market Vectors Egypt Index ETF to speculate on the shares. Its price slipped about 1 percent during the suspension, then plunged 8.1 percent after the exchange reopened.

The Greek ETF had been a popular one in 2015, with investors sending money to it every single week until the shutdown. In total, it gathered $281 million, heading for a record year of inflows. Its market value reached an all-time high of $367 million on June 25.

Outside Listings

An ETF tracking Greek equities with listings in France, Germany and Italy was halted during closure, though investors could still trade it over the counter.

Another indicator for the direction of the market comes from Greek stocks with listings outside of Greece. American depositary receipts of National Bank of Greece SA have tumbled 33 percent in New York from June 26 through Thursday. Bottler Coca-Cola HBC AG, which makes up more than a fifth of the fund and is listed in London, has retreated 6.4 percent through Friday.

During the shutdown, some bond trading had been going on. BlackRock Inc., the world’s biggest money manager, bought Greek debt in the days following the nation’s agreement with its creditors, according to Michael Krautzberger, head of euro fixed income for the company in London.

Government Bonds

Trading in Greek government bonds was scant even before the closure. Data from the Bank of Greece’s electronic secondary securities market, or HDAT, showed trading volume across all maturities totaled 2 million euros in May, matching that of April, the least since February 2012. Trading plunged to zero in October 2011 after peaking at 136 billion euros in September 2004.

About 102,000 euros of Greek government bonds traded on the Luxembourg Bourse this week, according to Guy Weymeschkirch, head of markets and surveillance at the exchange. That’s similar to the weekly volume changing hands before the exchange suspended trading at the end of June.

The ban on trading 25 Greek issuers -- from government bonds to those of Alpha Bank AE and Hellenic Telecommunications Organization SA, was lifted on July 24. There was no trading this week on any non-government bonds, Weymeschkirch said.