Citigroup in its last report on Greece is looking further than its usual musings on political developments, and is specul;ating as to which stocks may benefit from the possibility of early elections.
Citigroup has repeatedly noted that the likelihood of early national elections in Greece could make the next six months tricky for investors. Less than a week ago it had posited that: “Possible deadlock in the early-2015 vote among MPs to choose the next Greek President could trigger early national parliamentary elections in Greece in spring 2015, in our view, with a distinct possibility that the next government will be led by the opposition, anti-bailout party Syriza.”
Therefore according to Citigroup the stocks that will not suffer due to any change in the political background are telecom OTE, Aegean Airlines, PPC DEH, and Ethniki Bank.
Each of these has its own special characteristics that make them stable. OTE and Aegean Airlines have shown that they behave irrespective of political conditions. PPC DEH stock is very low ahead of upcoming privatization, which will not take place under a SYRIZA governmen, which would probably proceed with a radical reorganization of the firm. As for Ethniki Bank, it has the lowest rate of non-serviced loans.
Citigroup believes the recent vote of confidence in the government was just a ploy to buy time
The Greek government now has a 154-seat majority in parliament, but needs 180 seats to elect a new president. With the left-of-center Syriza party (“Coalition of the Radical Left”) pushing for a reversal of outside austerity funding, Citibank is expecting a significant confrontation between Greece and its lenders. Citi’s Giada Giani and team wrote ten days ago:
“Possible deadlock in the early-2015 vote among MPs to choose the next Greek president could trigger early national parliamentary elections in Greece in spring 2015, in our view, with a distinct possibility that the next government will be led by the opposition, anti-bailout, party SYRIZA. This is likely to take the degree of confrontation with Greece’s official lenders much higher than in the past, possibly jeopardising still-fragile foreign investor sentiment on Greece. An early exit from the bailout programme, as the government is pledging, risks yielding a similar result.
We believe Greece needs foreign capital inflows to support the economic recovery, given the still-tight domestic liquidity situation and recent signs of weakening economic momentum. Greece will likely accept some form of external monitoring by
official creditors continuing beyond 2014, possibly agreeing on a precautionary credit line after the EFSF programme expires in Dec-14. While contagion from Greece to the rest of Europe is likely to remain limited (barring the unlikely scenario
of renewed Grexit worries), we reckon idiosyncratic risks around Greek assets will remain elevated in coming months.”