The A.A. is at the top of global yields hovering near nine-year highs, indicating significant capital is gradually heading to Greece.

Based on Thursday’s close (1,202.43 points), the General Price Index recorded the highest gains (+29.32%) among the major global indexes, followed by the Russian index (+23.02%), the Nasdaq ( +21.32%). The Greek stock market records more than double the gains compared to the major European stock markets (DAX +13.43%, CAC +11.67%).

The market “read” the election result as the best possible scenario, a result as it reduces the political risk, paving the way for the recovery of the investment grade in the coming months.

Morgan Stanley sees investment grade coming and explains that equity markets outperformed the emerging markets index by 22% in the eight months or so before the upgrade to investment grade.

It was not only the explosive rise of 6.09% the day after the elections, but also the explosion of transactions which shows that significant funds are being directed to Greece. Something that has of course been done gradually in the previous months, as new “players” come to the AX in view of the recovery of the investment grade.

Eurobank Equities notes that with the obstacle of the electoral cycle having been overcome, a significant revaluation of Greek assets is expected, as investors will position themselves for the impressive story of Greece in the coming years, and the powerful weapons of the Greek economy, such as the increase in GDP by 2-3%, the attractive features of public debt and therefore bonds, and the cheap valuations of Greek stocks. Eurobank Equities recommends that investors shift to a pro-risk stance by shifting their portfolio to banks, PPC, OPAP and Mitilineos.

Axia emphasizes that political risk is out of context for Greece. The above should lead to the very positive reaction of the Greek stock market based on expectations for continued structural reforms and policies from a market-friendly government, combined with strong economic prospects and relatively undemanding valuations. According to Axia the political risk in Greece is very low (lower than most countries worldwide).

Axia believes that PPC, HelleniQ Energy and Ethniki will benefit from political clarity, construction/infrastructure companies and EYDAP will benefit from uninterrupted bidding activity and regulatory processes and banks, highly liquid stocks (OTE , Mytilineos, Jumbo and Motor Oil) to react very positively to the prospect of recovering the investment grade as well as HEXA.

Optima Bank notes that in the light of the elections and the resounding victory of the ruling party, which paves the way for the formation of a government in the repeat elections, an acceleration of pro-market reforms is expected in the second New Democracy administration, with the aim of ensuring: a) the positive trajectory of GDP growth, b) the further de-escalation of the public debt in relative terms and c) the recovery of the investment grade, possibly in the second half of 2023. According to Optima Bank, the stocks that will “run” the most after the results of the ballot are the banks, PPC, Mytilineos, Motor Oil, of ELPE, Terna Energy, GEK TERNA, Intrakat, Ellactor.

The rating agencies

Political continuity and reforms were brought out by the polls according to the rating agency S&P Global Ratings, which will evaluate the Greek economy on October 20. The strong majority of New Democracy may lead to an upgrade of Greece’s credit rating, DBRS estimates, in the aftermath of the elections. The country is one step behind investment grade, according to the three houses S&P, DBRS and Fitch. The exception is Moody’s, which still holds Greece back by 3 notches.

The Greek Economy comes one step closer to the coveted investment grade, after the results of the May 21 elections.

Investors are discounting an investment grade recovery for Greece earlier than expected, with the next rating coming from Fitch on June 9.

The strong percentage obtained by New Democracy significantly increases the probability of forming a government again, notes Moody’s. This means that there will be continuity in fiscal and economic policy and is positive for Greece’s creditworthiness (credit positive).

Moody’s forecasts that Greece will see one of the largest debt reductions globally, with general government debt falling below 150% of GDP in 2025 from 171.3% in 2022, thanks to the prospect of significantly higher nominal GDP growth the next years

Bonds

And the bond market welcomed the result of the national elections in a particularly positive way, as it signals political stability and the continuation of reforms. After all, the investment houses had made a pre-election commitment that under these conditions they would proceed after the elections to upgrade the country’s credit rating to investment grade. Even lower than the yield of the corresponding British 10-year bond, apart from the Italian one, the Hellenic one fell at the beginning of the week, with the goal for Greece now being to reach the borrowing levels of Spain and Portugal.

Greek stocks are cheap

Morgan Stanley suggests the Greek market as the top choice among Europe’s emerging markets. According to Morgan Stanley, valuations of Greek stocks remain cheap. The domestic market trades on a P/E ratio of 7.7 times for the next twelve months, below the long-term average. The dividend yield ratio has moved away from its recent high and now stands at 4.9% and remains above its average. The book value P/BV ratio is higher vs. historical at one time, which is fully justified by the improving environment and yield dynamics.

The results announced by listed companies justify higher valuations.

The 1st quarter of the year proved to be strong for Greek banks which exceeded the average estimate of analysts. Additionally, liquidity positions remained strong and organic NPE formation remained negative, . Capital dynamics also improved.

Quarterly net profit was 787 million, while net interest income was the main driver of higher loan and bond interest income. Net interest income accelerated 10% quarter-on-quarter to $1.87 billion.

The technical picture of the market

The election result was ideal to support the market and bring in new money that keeps the movement going.

The market’s upward movement has been coming since late last September, with the main stock index recording gains of more than 50%, showing no strong signs of fatigue.

Technically, particularly positive is the particularly strong resistance of 1,150 units, which has been coming since 2014.

In a bigger technical picture, the upside comes from the break of 910 units, with the first medium-term major target being the 1400 zone.

The 1,200 units are now the reference point of the next meetings of the General Index and with an upward diagrammatic target of 1,380-1,400 units.

2013 returns

The biggest increase since the beginning of the year is recorded by the shares: MIG +213.80%, Piraeus +96.11%, Klukinas-Lappas +92.19% and Cenergy +79.80%.

On the contrary, the biggest drop was recorded by the shares: Frigoglass -39.18%, Mermeren -28.14%, Akritas -20.34% and Myloi Kepenou -17.32%.

From the high capitalization, the shares recorded gains: Piraeus +96.11%, Aegean Airlines +76.56%, Ethniki +58.53%, Mytilineos +42.86%, PPC +42.79%, Eurobank +42.18 %, Autohellas +38.80%, Jumbo +37.55%, Viohalco +37.08%, Alpha Bank +36.00%, Titan +33.33%, Ellaktor +26.86%, GEK TERNA +25, 69%, PPA +23.67%, Quest Holdings +22.51%, OPAP +21.69% and Coca Cola HBC +21.68%. The shares follow: Sarantis +12.63%, Elvalhalcor +8.27%, Lamda Development +4.62%, Motor Oil +2.02% and ELPE +0.40%.

On the contrary, the following securities fell: OTE -3.43%, EYDAP -1.91%, Terna Energy -0.79%.