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Athens Exchange | Riding the cyclical wave

Constructive after the correction; Greek thesis intact – The ASE index kicked off 2024 strongly soaring 16% by mid-May, powered by a 26% jump in banks and a 10% rise in non-financials. Key factors behind this rally included: i) modest re-rating, ii) EPS beats, iii) a supportive macro backdrop (2024-25e GDP growth >2%, above most EU countries), and iv) solidified investor confidence and improved liquidity, evidenced by the rising ADV. However, since mid-May the ASE index has dipped c4%, weighed down by: i) a general risk-off due to political uncertainty in France, and ii) re-positioning ahead of ECB rate cuts, mainly impacting banks. Despite this dip, we remain constructive on Greek equities, fact which underpins our positive stance on ATHEX. Besides core fundamental drivers which remain intact, we also see plenty of scope for convergence in metrics such as MCap/GDP and trading velocity, where Greece trails behind other markets. Hence, we expect volumes and MCap to remain on an upward trajectory, further boosted by a growing appetite for IPOs and corporate actions. The potential return to Developed Market status looms as a positive catalyst, albeit with a pushed back timeline and less clear read-through in terms of medium-term impact, in our view.

MSCI skips Greece's DM watchlist placement; Focus shifts to FTSE & Stoxx – Hopes for MSCI's June 2024 review to place Greece on watchlist for potential upgrade to DM were not fulfilled, thus leading to a shift in focus towards the upcoming FTSE review in Q3’24 followed by Stoxx (potentially early 2025). In our view, Stoxx's criteria (4 stocks with MCap of $3.6bn, free-float of $1.8bn) appear more attainable than those of FTSE, while being particularly relevant for banks. That said, although the inaction by MSCI might be seen as somewhat disappointing, investors had not really positioned for Greece’s addition to a watchlist. That said, this inaction does mean that growth will be more relevant than multiple expansion this year, as scope for a reduction in risk premia looks more limited in the absence of the major technical catalyst related to MSCI news.

ATHEX remains a cyclical recovery story, with 23% 2023-26e EPS CAGR driven by ADV rebasement – With H1 trading activity and MCap up 28-30% y/y , we now input 2024-26 ADV at €143-180m (+28% in 2024, +c12% p.a in 25-26e), a 2023-26e CAGR of 11% in MCap and velocity at 36%-40% (vs EU avg of 59%), still corresponding to a MCap/GDP