April 1, 2023

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Athens Stock Exchange: Should we buy in the correction?

Finally, the Athens Stock Exchange managed to rise for the eleventh consecutive week. Of course, the increase was quite marginal at 0.12%, but it’s still an increase. Whether this remarkable performance constitutes some kind of record is of little concern to us, after all, records have not made anyone rich.

Our concern from a stock market point of view is whether some of the signals we saw last week are the first indications of a correction that all Greek stock market participants are eagerly awaiting. What are these signs? The inability of some major stocks that participate heavily in the main stock market indices to break some important levels to the upside.

We mainly refer to banking stocks and OTEs, but we repeat that these are just some of the signs. For banking stocks in particular, we saw the difficulty of the break-up offset by buyers returning once they fell 4% to 5% from the “hard” pips.

But it is true that a correction during which the major shares of the Athens Stock Exchange fall 10% or more from prices that would prove to be high domestically is very possible, even for some. No matter how good the market prospects are, at some point the time has come to rest.

In the case of our stock market, profits are very large and resisting the temptation to make some is not easy. We must also not forget that for many investors, especially foreign ones, parliamentary elections in any country always cause increased caution.

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Another factor that increases the chances of a corrective move in the Greek market is the fact that the international stock markets have been suffering a bit since the end of January at the same time that our markets are rising almost without any resistance.

So the question is simple: what to do if this correction has already begun. First of all, we must say that if this is the case, we will understand it very quickly in the coming days when we see buyers less willing to absorb supply.

As we said earlier, the last few days have seen more sellers but buyers appearing a bit less and bucking the downtrends. If a correction starts, the buyers will gradually take a downward move waiting to see how determined the sellers are.

At the moment, they do not seem to be so determined, judging by the fact that the volume of transactions in the last two stock exchange sessions, which were bearish, showed a relative decrease. However, this may change in the coming days and prices may drop further.

Once this is done, investors who have cash, either because they hesitated to make purchases as the market soared strongly or because they have reduced their positions in recent days, will have to decide whether to buy Greek stocks.

The short answer is yes. Provided that global markets remain close to their current levels and that the pessimistic voices heard by Morgan Stanley and Bank of America analysts and international figures such as Nouriel Roubini, known since the 2008 crisis, will not be verified. It is clear that the prospects for most, and not only, large companies listed on the Athens Stock Exchange are positive, as we have seen recently (Athens Stock Exchange: Three Catalysts Leading to Further Growth | Liberal.gr).

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In the coming weeks, more and more announcements will begin to appear about the annual financial results for the year 2022, which are expected to confirm the excellent performance of the majority of the listed companies, following what we heard from (few) companies that have this. So far released its results.

We must also not forget that the chances of upgrading our country’s credit rating and returning it to investment grade are very great, which serves to support the ratings of companies on the Athens Stock Exchange.

So if an opportunity is presented to buy at a discount of 10% or even a little more, it makes sense for those with cash reserves to take advantage of it. Of course, this does not mean that they must exhaust all of their liquidity at once. After such a significant rally in a relatively short period of time, we can never be sure how deep the correction will be in both price and timing.

This will depend on the international stock market environment and how cautious investors are as the parliamentary elections approach. As we usually say, the answers to such questions are provided by the market itself and the behavior of the stocks.

Pending these answers, investors who want to increase their exposure to the Athens Stock Exchange can start to do so gradually. Looking for the “right” opportunity to hit the money all at once is rarely a wise move.