the international investors’ view of risks and opportunities in greek financial assets materials...
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The International Investors’ View Of Risks and Opportunities in Greek Financial Assets
Materials for Presentation
November, 2000
Overview
Greek Economy – An Overview
Macroeconomic Development and Indicators
Credit Ratings and Rating history of the Hellenic Republic
Credit Developments and Implications
Bond Markets
Equity Markets
Macro-economic risks
Addressing the Changing Market Environments
Greek Economy – Overview of a positive development
1999E GPD US$ 128.9b. (2000E US$ 123.5bn.)
Real GDP Growth rate above EU average since 1996 – 3.5% in 1999
Large public sector in the economy
Steady economic improvements in recent years
Improving public deficit and tightened monetary policy
On-going low inflation - average of 2.6% in 1999
Privatisation for leading Government enterprises in progress
Convergence and integration in EMU well on track
Falling interest rates and improved credit profile
GDP - Overview(1998)
27%
8%
65%
Agriculture Industry Services
Source: CIA World Fact book 2000
Greek Economy – Inflation Declined whilst Growth Increased
Real GDP Growth Rates
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1995 1996 1997 1998 1999 2000E
%
GDP Growth Rate
Inflation Rates
0.01.02.0
3.04.05.06.0
7.08.09.0
1995 1996 1997 1998 1999 2000E
%
CPI Inflation (% change end-of-period yoy)
Source: National Bank of Greece; CSFB Research
Greek Economy – Unemployment and Interest Rates Are Heading Down
Unemployment Rate
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
1995 1996 1997 1998 1999 2000F
%
Unemployment Rate
Interest Rates
0.02.04.0
6.08.0
10.012.0
14.016.018.0
1995 1996 1997 1998 1999
%
Three-month ATHIBOR10-year Bond Yield
Source: National Bank of Greece; CSFB Research
Greek Economy – Deficit Control at Work
Government Deficit
0.0
2.0
4.0
6.0
8.0
10.0
1995 1996 1997 1998 1999
%
General Gov. Deficit / GDP (%)
Current Account Deficit
0
1000
2000
3000
4000
5000
6000
1995 1996 1997 1998 1999
EUR mil.
Current Account Deficit
Source: National Bank of Greece; CSFB Research
The Sovereign Credit Rating of Greece: Now Firmly Single-A
Moody’s
Foreign Currency: A2
Local Currency: A2
Outlook:
“STABLE”
Standard & Poor’s
Foreign Currency: A-
Local Currency: A-
Outlook:
“POSITIVE”
Fitch
Foreign Currency: A-
Local Currency: A-
Outlook:
“STABLE”
Sovereign Rating History – LT Foreign Currency Debt
Q11992
Q11993
Q11994
Q11995
Q11996
Q11997
Q11998
Q11999
Q12000
Moody's
S&P
Baa2 / BBB
Ba2 / BB
A2 / A
Aa2 / AA
Aaa / AAA
A3 / A-
Baa1 / BBB+
Baa3 / BBB-
Ba1 / BB+
A1 / A+
Aa3 / AA-
Aa1 / AA+
Credit Spread: Hellenic Republic $ Bond (2008) – US$ Swap
0
10
20
30
40
50
60
70
80
90
100
Feb-9
8
Mar
-98
Apr-9
8
May
-98
Jun-
98
Jul-9
8
Aug-9
8
Sep-9
8
Oct-9
8
Nov-9
8
Dec-9
8
Jan-9
9
Feb-9
9
Mar
-99
Apr-9
9
May
-99
Jun-
99
Jul-9
9
Aug-9
9
Sep-9
9
Oct-9
9
Hellenic Republic – Credit Development
Country Risk has declined
Greek Government has gained credibility
Foreign currency credit “ceiling” has been upgraded to Aaa by Moody’s
Convergence to EMU criteria is well on track
Entry in Euro-zone likely to result in:
Monetary Stability
Low interest rates
Reduced exchange rate risk
Financial markets denominated in Euro’s
Better level-playing field with other European countries
For the international investor these macro-economic developments may relatively increase the attraction of Greek investments
Greek Issuers are well Established in the Eurobond Markets
0
1000
2000
3000
4000
5000
6000
1990 1992 1994 1996 1998 2000F
US$ mil.
Source: Bondware
Unrated31% BBB+
11%
BB-1%
BB0%
BBB1%
A-56%
Bond Issuance by rating
Others12%
Bank/Finance
25%Food/Tob/
Hotel0%
Media 0%
Energy9%
Govt/Authority
54%
Bond Issuance by sector
Equity Markets – Market Capitalisation
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1990 1992 1994 1996 1998 Sep-00
Total of Listed Shares
GRD bn.
Data Source: National Bank of Greece
Correction and slow-down in 2000
Volatility in the Greek equity market
World-wide volatility in equity markets
Volatility due to limited size and liquidity
Volatility due to significant concentration
Consolidation in Banking sector
Large caps and telecom performance has retained strong performance
Equity Markets
Source: Bloomberg. 02/01/1998=100
0
50
100
150
200
250
300
350
400
450
500
ASE
MSCI Europe
FTSE-100
DAX
European Equity Indices 1998-2000
The Greek Stock Market – Concentration and Diversity
Main Sectors in the Economy:
Banks 27.7%
Telecom 12.6%
Metal industry7.3%
Company Sector 30/12/1999 04/10/2000OTE Telecomunication 6.1% 7.8%National Bank of Greece Banks 5.9% 7.4%Eurobank-Ergasias Banks 2.9% 5.2%Alpha Credit Bank Banks 4.0% 5.1%Panafon Telecomunication 3.5% 4.0%Commercial Bank of Greece Banks 3.4% 3.5%Intracom Metal Industry 2.3% 2.9%Hellenic Bottling Food and Beverages 1.5% 2.5%Bank of Piraeus Banks 1.6% 2.4%Hellenic Petroleum Energy 1.9% 2.2%Viohalco Holding 1.7% 2.0%Interamerican Insurance 1.4% 1.6%Lambrakis Publications Publications 2.1% 1.4%ETBA Banks 0.0% 1.2%Titan Cement Building Materials 1.1% 1.2%Total 39.4% 50.4%
*15 Largest Companies by Market Capitalisation
Modernizing the Economy and Reducing Public Debt through Privatizations
Company
Announced Privatization programme
next 14 monthsHellenic Vehicle Industry Strategic investorAthens Stock Exchange Strategic investorHellenic Aerospace Strategic investorOlympic Airways Strategic investorCOSMOTE (subsidiary of OTE) PrivatizationHellenic Postal Service Strategic investor Horse racing organization Assignment of management to private concernsFootball Pools Organization FloatationThessaloniki Port Organization FloatationAgricultural Bank of Greece FloatationGreek Telecom (OTE) Strategic investorHelexpo Trade Fair FloatationThessaloniki Water Company FloatationPublic Power Corporation FloatationPireus Port Organization FloatationNational Bank of Industrial Development Floatation
“Privatisation Programme well on track”:
Increased market volume
Increased market liquidity
Macroeconomic Risks – Investors’ viewpoint
Tight Financial and Monetary Policy likely to continue High level of public debt will remain a constraint for years to come EMU convergence well on track – but still incomplete Unemployment still a major challenge
Further Slowdown of EU growth GDP growth slows down by 0.7% for each 1% reduction in EU growth Current Account deficit to GDP increases and neutralises the devaluation effect
Increase in import prices Sustained high oil price may adversely affect economy EUR/USD exchange rate affects GRD price of oil and commodities Inflation increases by 0.20pp for every 1% increase in import prices
Data Source: National Bank of Greece
Addressing the Changing Market Environments
Move from EMI to MSCI in 2001 will impact the Greek business environment
Analytical focus will move from country base to sector base
Relevant peers will now be top performing worldwide corporates
Recommended approach for Greek companies:
New beginning in communicating with investor community
Increased transparency
Improved financial reporting
Adoption of IAS in addition to Greek GAAP
Improved Investor Relations capabilities
Communication
Corporate information readily available
> Value creation through analyst and investor “friendly” corporate structures and communication policies