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Evolution and opportunities in the Greek capital market
Dr Panayotis Alexakis President of the Athens Stock Exchange (ASE) and the Athens Derivatives Exchange (ADEX) May 2001
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ASE Basic Objectives
A deep and liquid market
Maintain the standards of the EU capital markets to achieve equal participation in the formation of the single European capital market
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ASE Vision
An exchange that is:
Strong
Safe
Reliable
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Structure
Greek equities market:
Main market
Parallel market
New market
Secondary listings of equities
GDRs, and units of mutual funds for emerging markets
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Derivatives market (Futures and options)
Indices
Bonds
Stocks (in 2001b)
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Indices
General index
Parallel market index
Sectoral indices
FTSE/ASE 20
FTSE/ASE Mid 40
FTSE/ASE Small 80 (in June 2001)
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The Greek Economy and ASE
Stable economic and political climate Greece’s entry into the Eurozone, since January 1 st 2001
Balanced budget, low inflation rate
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Sustained growth prospects:
Real GDP growth 4.1% in 2000 and projected 5% for 2001, exceeds that of Eurozone’ average, 3.4% and 3.0%, respectively.
EUR 25 bn in EU structural funds for investment in Greece.
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2004 Olympics to boost investment Restructuring and privatisation are in progress
Telecoms, energy and transport liberalisation
Market cap has increased since 1998 (from Euro 67,100 million to Euro 118,200 million in end 2000)
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Capital raised through ASE
Euro 8.5 bn in 2000, 6.5% of GDP
ASE provided more financing than banks in same period
Greece has high market cap/low credit level for non-banking sector
Capital raised (Euro bn)
97 98
0.2 3.3
99 12.9
00 8.5
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Sectorial breakdown
Parallel 9% Miscellaneus 16% Construction 4% Industrials 16% TMT 19% Financials 36%
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Blue chips have performed better since 1998
Banks and telecoms represent one third of volume traded.
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ASE restructuring directions
Legal and regulatory framework restructuring
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Modernisation of listing requirements, minimum equity, minimum free float, company records.
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Upgrading of listed companies, financial disclosure, corporate governance, use of funds raised
Information technology infrastructure modernisation
• • •
ASE wide area network upgrade efficient trading and clearing systems operation of a dematerialised shares system
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New products
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New indices (local and regional) in co-operation with FTSE
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The operation of the Athens Derivatives Exchange with futures and option products
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The creation of a new market for dynamic, fast growing companies
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Emerging market instruments for the region of S.E. Europe – S.E. Mediterranean, such as GDRs, mutual funds and portfolio investment companies for emerging markets.
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Strengthening of ASE’s position in the region, through the listing of firms in Athens, and cooperation agreements with exchanges.
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ASE New Organizational Structure
Strengthening of listed companies division
Strengthening of market surveillance through on line-real time systems
Creation of business development division, with marketing, sales and R&D departments
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Rationalisation of the companies under the Hellenic Exchanges S.A. holding company.
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Merging of ADEX with ASE
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Enhancement of the role of the derivatives clearing house to act also for the stock market
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Enhancement of the role of the holding company Hellenic Exchanges SA, which is listed in ASE
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Improvement of institutional and operational framework, replacement of laws and ministerial decisions by an operational rulebook for ASE,members, listed companies and investors
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Timely preparation and the market functions in Euro s , since the beginning of January 2001
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7000 6000 5000 4000 3000 14 March 98 Devaluation of drachma 2000 1000 0 August 98 Rusian economic crisis ATG 9 April 00 Greek elections 19 June 00 Greece’s entry in Eurozone officially approved 1 January 01 Greece’s entry in EMU 19
Equity market indicators
General index (1980=100) FTSE/ASE 20 FTSE/ASE 40 Market Cap of ASE (Euro bn) Market Cap of ASE (USD bn) Market Cap/GDP (%) Avg. daily volume (Euro m) Avg. daily volume (USD m)
1998 1999
2,737 1,724 n.a. 67.1 61.7 5,535 2,910 1,000 197.4 181.6 64.2% 177.2% 157.4 144.7 725.5 667.5
2000
3,338 1,903 402 118.2 108.7 99.7% 390.7 359.4
End March
3,044 1,745 371 110.6 98.4 82.7% 133.1 118.9 20
0.7
Breakdown of volume traded
Banks Small Caps.
Holdings Construction Telecoms Wholesale Textiles Food Investment Cos.
Metallurgicals Informatics Insurance Other
End-March
20.9% 12.9% 8.1% 7.6% 6.8% 5.7% 4.8% 3.2% 2.4% 2.1% 2.1% 1.2% 22.2% 21
Funds
• • • •
Great interest in IPOs and Rights Issues imply cash rich companies At the end of 1998, equity mutual funds held only a 6% stake of the mutual funds market. In early 2000 equity mutual funds had increased their stake to 40.9%. At the end of 2000, equity mutual funds held about 22% stake of total mutual fund market. We expect that in the long term the trend towards equity funds will resume, with their market share approaching that of the European average (48%).
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Flow of funds
Companies listed IPOs (Euro m) Rights Issues (Euro m) Total funds under management (Euro m)
Equity mutual funds Non-equity mutual funds Equity/ Total funds (%) Balanced/ Total funds (%) Bond/ Total funds (%) Money Market/ Total funds (%)
1999
282 2,349 8,070 35,039 14,330 20,709 40.9% 8.7% 11.3% 39.1%
2000
332 1,811 6,608 30,249 6,659 23,590 22.0% 10.4% 15.4% 52.2% 23
Market Indices
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On July 31 st Morgan Stanley Capital International decided to include Greece to its developed markets indices, effective from May 31 st , 2001.
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The capitalization of MSCI Greece increased by 27.6% (from US$ 47 bn to US$ 60 bn).
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Key sectors in Greek Capital Market
Financials Consumer goods Telecoms IT – Technology - Internet Media Industry – Energy Tourism –Transportation Other
Market cap
38.0% 10.0% 13.5% 8.6% 3.6% 17.4% 3.1% 5.8%
MSCI Greece
43.2% 10.1% 15.2% 7.7% 1.6% 15.6% 3.0% 3.6%
MSCI World
19.0% 7.0% 8.5% 17.6% 4.0% 22.0% 2.5% 19.4% Financials, Telecoms and the Energy Sector have a heavy weight in the Greek market cap.
The sale of a minority stake of Public Power Corporation and of Hellenic Petroleum to strategic partners as well as the privatization of Hellenic Telecom Organization and of Olympic Airways is on schedule. 25
Indices valuation
MSCI Greece which accounts for 51% of total market cap trades at a P/E of 16.8x and an EV/EBIT of 22.7x General index which accounts for 58% of total market cap trades at a P/E of 15.3x and an EV/EBIT of 24.4x
The research of most Greek and foreign Stock Brokerage Houses indicates a market P/E of 14.9x and an EV/EBIT of 22.7x.
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Comparison
W. Avg. actual P/E, Greece W. Avg. actual P/E, Europe Source: P&K Research, SSB, MSCI
1999
18.0
29.8
2000
16.5
24.4
2001e
14.9
21.6
At 14.9x 01e P/E compared with a European 21.6x, the Greek market looks cheap
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Sector valuation
Banking Insurance Health care Retail/Durables Retail/Non durables Materials Cements Packaging Energy IT Telecoms Construction
Source: P&K Research
2001e P/E
13.9
29.3
34.2
21.5
18.9
22.2
12.7
21.0
11.9
25.5
16.0
17.0
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ASE Offers
Foreign investors can be assured that ASE is committed to offer a
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Safe,
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Credible, and
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Transparent market
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For more information
http://www.ase.gr
Thank you for your kind attention
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