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Greek Equity Strategy | Another sweeping win for ND and absolute majority; clear path to re-rating

New Democracy garners 40.55% securing comfortable absolute majority – New Democracy (ND) has scored another overwhelming win, garnering 40.55% of the votes effectively retaining its power vs the previous elections (40.79%). Given the seat bonus offered to the winning party under the enhanced proportionality system, ND has secured a comfortable majority controlling 158 seats in the 300-seat Parliament. Syriza came second at just 17.8% (48 seats), suffering further blow vs the May elections (20.1%). PASOK came 3rd with 11.85% (32 seats), the Communist party placed fourth (7.7%, 20 seats) while the far-right Spartans party, backed by ex-member of the far-right Golden Dawn, had a surprisingly strong showing coming fifth (4.6%, 12 seats). There are 3 more parties securing parliamentary representation, namely Greek Solution (4.4%, 12 seats), Niki (3.7%, 10 seats) and Plefsi (3.2%, 8 seats). Overall, the Parliament is more fragmented than under the previous round (8 parties vs just 5) as a result of far-right parties increasing their representation amidst lower turnout (just under 53% of eligible voters vs 61% in May) but with ND effectively retaining its power in Parliament vs the 2019 election.

Clear path for reforms… – With a solid majority in parliament, New Democracy now possesses the necessary political mandate to push forward with a comprehensive reform agenda during its next 4-year term. The party's commitment to streamlining bureaucracy, enhancing the business environment, and implementing structural changes is set to attract domestic and foreign investment, especially taking into account the vast investment gap (fixed investment still at 25% discount vs EU peers. As for banks, the lower-priced cohort, namely Alpha and Piraeus, remains at compelling valuation levels with plenty of scope to narrow the gap vis-à-vis foreign peers as conviction in Greek banks’ ability to generate sustainable 2-digit RoTE increases. With Greece offering a cheap source of cyclicality, compelling starting valuations, low positioning, a healthy macro outlook, solid profit growth profile for listed entities and technical catalysts (sovereign rating upgrade), we believe the investment case for Greek equities has not been clearer in the last 17 years.

Top picks – Our preferred list of picks is a mixture of quality names with high earnings visibility and cash returns (OPAP, Jumbo, Mytilineos) further supplemented by higher-beta stocks at low valuation, namely PPC and Piraeus Bank.