Greece's banking stocks plunged for the second day in a row on Tuesday, holding down the main Athens index which otherwise turned the corner after the previous day's record rout. Nineteen of the exchange's 25 bluechip stocks rose on the day, and the main index, of which around 20 percent is banks, was down only 1.2 percent. Officials said they expected the coming days would see trading calm down.
With lenders in dire need of recapitalisation after a flight of euros from deposits for most of this year, the banking index closed down more than 29 percent, effectively at its 30 percent daily loss limit at which trading is halted. It was at that limit on Monday. Many non-financial sector indexes gained on Tuesday. The bluechip retail sector, for example, was up more than 11 percent, driven by a similar rise in its main component, international jewellery chain Folie Folie.
The gains in non-financials suggested that historically low valuations were attracting investors and that fears of further turmoil between Greece and its international lenders were primarily consigned to banks. "The second day of trading showed clear signs we are moving towards a normalisation of the market after the long shutdown," said Socrates Lazaridis, chief executive officer of Hellenic Exchanges.
Among gainers were gaming group OPAP, up 4.2 percent, and Aegean Airlines, 8.8 percent. The main index lost 16.2 percent, around 8 billion euros in value, on Monday, the first day of trading after a five-week shutdown taken as a protective measure as indebted Greece sought to hang on to euro zone membership. There was no spillover evident from Greece's bank woes to other European markets. Many investors have cut their exposure to Greece and are focusing more on the state of core markets such as Germany and France.
Athens is in new bailout talks with its European Union partners and the threat of political and economic instability remains high. There have, however, been signs of progress. Greece said it expects to conclude a bailout deal with international lenders by August 18, with the drafting of the accord starting on Wednesday. Its finance minister went further:
"Everything will be concluded this week," Euclid Tsakalotos told reporters after meeting representatives of the International Monetary Fund, the European Commission, the European Central Bank and the euro zone's rescue fund, the European Stability Mechanism. He did not elaborate and it was not immediately clear what level of agreement he was referring to.
It has been estimated by both the banks themselves and the creditors that between 10 billion and 25 billion euros ($11 billion-27.5 billion) is needed to recapitalise Greek banks. The economy, meanwhile, has reversed course and is heading back into recession. The European Commission says it will shrink by 2 to 4 percent this year, a return to the recession that plagued Greece for six years until 2014.