GIG: The market cap of the Athens bourse plummeted during the country’s crisis years, as did liquidity levels. What steps are you completing to help Greek securities become more competitive?
Lazaridis: The decline in total market cap during the period of the economic crisis is not fully representative of the performance of listed stocks on the Athens Stock Exchange. A closer look reveals that, excluding banks whose performance is linked to GDP, the majority of stocks that constitute the FTSE Large Cap and Mid Cap Indices have shown consistent positive performance since 2010, with half of them having double digit annual growth. The performance of the ATHEX General Index does not reflect the full picture of the market. Other sub-indices can show a more complete picture. For example, the export-oriented FTSI/ATHEX Global Traders Index Plus, as well as the FTSI/ATHEX Mid & Small Cap Factor Weight Index, have significantly outperformed the General Index. Since 2010, the former rose by 95,85% and the latter by 244,19% compared to -35,17% for the General Index.
Regarding the reduction of liquidity, this can mainly be attributed to the closing of the prop desks around Europe during the same period – which had an impact on all markets – combined with a reduced contribution of local retail investors in daily turnover as a result of their reduced disposable savings.
Looking ahead, ATHEX has put in place a range of strategies to make securities more competitive and to strengthen the market. Over the course of this period, we have taken the following steps:
- We promoted the development of the corporate bond market. The timing was ripe because the economic conditions were more favourable towards the issuance of corporate bonds rather than IPOs. Towards the end of 2019, there were 14 listed corporate bonds on the ATHEX market that raised a total amount of €1.37 billion.
- We stepped up our efforts to increase the visibility of listed companies. Apart from the traditional annual roadshows in New York and London, in 2018 we introduced two annual roadshows in Greece – the Mid Cap and the Small Cap Conferences. The aim of these roadshows is to increase awareness of fundamentally sound companies that have not been adequately represented in the portfolios of local institutional investors. We have already started seeing results in the form of increased contribution of these companies to total turnover.
- We promoted the use of market makers. The contribution of market makers in daily turnover rose to 11.5% in 2019, after having reached a low of 4.6% in 2014.
- We launched Roots, a pre-IPO programme that helps innovative small and medium enterprises (SMEs) achieve investment readiness. The programme combines advisory and training opportunities with access to an international network of experts. It is designed to help SMEs accelerate their growth and access financing opportunities through the Greek capital market by mobilising key players within its ecosystem. The programme is offered in cooperation with the American-Hellenic Chamber of Commerce and with the support of strategic partners.
- We are focusing our attention on developing Environmental, Social and Governance (ESG) transparency in the Greek market. Given the growing demand from the investor community for material ESG information to improve corporate transparency and enhance ESG performance, the Athens Stock Exchange is starting the implementation of a plan focusing, firstly, on ESG guidelines for listed companies, and secondly, on a benchmarking and scoring tool for ESG practices in the Greek market. With this initiative, the Athens Stock Exchange aims to educate participants in the exchange ecosystem about the importance of sustainability issues, encourage more transparency on material ESG issues, and help companies improve their performance and attract new investors. This goes hand-in-hand with our mobilisation around corporate governance through the relaunch of the Hellenic Corporate Governance Council.
GIG: The Hellenic Energy Exchange is something very innovative for Greece. Can you tell us a little about it?
Lazaridis: The Hellenic Energy Exchange (ENEX) was established to reorganise the wholesale electricity market. Functioning as the interconnection between the Greek market and other European markets, ENEX aims to enhance competitiveness and transparency, thus reducing the cost of energy, ensuring energy supply through the diversification of energy sources, and increasing the inclusion of alternative energy sources in the product mix. ATHEX is not only participating in the ENEX’s share capital with a 21% stake, but it is also providing technical and operational support as well as settlement and clearing for the derivatives market.
GIG: What is or could be a game changer for Greek stocks? What change would help launch the market into its next growth phase?
Lazaridis: There are several potential ‘game changers’ for Greek stocks. If I were to identify the most important one at this point in time, it would be new listings. Over the past decade, the lack of macroeconomic stability, combined with entrepreneurs’ perception that valuations were low, brought the IPO market to a standstill. Given that the economy appears to have entered a period of relative stability, new listings should gradually start taking place as corporations have the opportunity to improve their debt-to-equity ratios through an increase in equity. This would allow them to grow further. Moving forward, certain catalysts, like privatisations, will be necessary to achieve this. Drawing from prevailing European trends, other factors that can contribute to the revitalisation of the IPO market are tax incentives to individuals investing in listed SMEs, either directly or through collective investment schemes and funds. We believe this would be a real ‘game changer’ as it would increase both the marketability of these securities and the overall liquidity of the market.
GIG: What kind of feedback have you been getting lately from foreign investors? Is there one particular sector that interests them more than the others?
Lazaridis: Foreign investors have enjoyed good returns by investing in non-financial blue-chip stocks during the years of the crisis, which is reflected in their high participation in both free float and average daily turnover.
Currently the velocity of the banking sector remains at a higher level than the market’s average, with declining volatility. The reason is twofold: firstly, the economy appears to have entered a mild growth phase and this is likely to impact banking stocks. In addition, systemic banks are accelerating their efforts to tackle the high stock of NPLs on their balance sheets, which should impact their operating performance and overall growth.
Beyond the banking sector, foreign investors have shown significant interest in energy, hospitality, and infrastructure – sectors in which Greece can yield a significant competitive advantage.
GIG: Why have bonds become more popular as a means to raise capital on the Athens bourse? What is their downside for companies wanting to raise capital?
Lazaridis: In 2015, we worked, in cooperation with the Greek Capital Markets Authority to propose a set of best practices and suggestions to remove barriers and restrictions for the issuance and listing of corporate bonds directly on the Greek market without the use of foreign special purpose vehicles (SPVs). This was successful, and it gave companies with good debt/equity ratios the ability to offer this product to local investors.
Over the last few years, this market has shown impressive growth, managing to attract investors who have participated in 15 bond issuances and raising a total of €1.43 billion. Bonds became a popular financial instrument due to the fact that undertaking an IPO during the years of the crisis, where there was high volatility, was a difficult decision for prospective issuers. Bonds proved to be a highly effective alternative that was attractive to investors and thus able to fill the financing gap in the market at the time. We are now in the first year following the period of crisis where the volatility of the General Index is lower than 20%, which suggests that there may be new opportunities for using ATHEX markets to raise capital.
GIG: ATHEX is part of a consortium that recently agreed to buy a 44% stake in the Kuwait Stock Exchange. Can you tell us about the deal and what you expect from it?
Lazaridis: The Athens Stock Exchange decided to submit a bid to participate as a technical, operational, and business services provider for Boursa Kuwait by forming a consortium with the largest possible participation from qualified local companies. The Consortium comprises ATHEX, as the qualified international operator, and leading listed financial groups in Kuwait: Arzan Financial Group (ARZAN), First Investment Company (FIC), and National Investments Company (NIC).
In February 2019, the consortium was awarded the bid, by way of a closed bidding process organised by the Kuwait Capital Markets Authority, for a 44% equity stake in Boursa Kuwait. The Public Institution for Social Security (PIFSS) owns a 6% stake, while the remaining 50% will be sold to the public through an IPO process. The resulting ATHEX participation in Boursa Kuwait’s equity stake is circa 0.8%, which amounts to an investment of approximately €1 million.
The active involvement of ATHEX in Boursa Kuwait is part of the group’s strategy to leverage its trading and post-trading technical and business knowhow and systems. As a market operator, ATHEX has the necessary experience and, with the cooperation of its local partners, plans to have an active involvement in Boursa Kuwait as a technical and operations solution provider and business development consultant.