-Stock market analysts predict upturn in share prices-

Bid to become the leading financial hub for the region

The Athens Stock Exchange (ASE) is emerging as an increasingly important financial centre in southeast Europe. Derivatives trading, launched in 1999 as a separate operation in which the ASE is a partner, has proven a success, and the big international investment houses are expected to reclassify Athens as a developed rather than an emerging stock market. All of this is not bad going for a stock exchange that experienced its deepest slump on record just last year. Share prices dropped by an average of 40 per cent compared with 1999; market capitalisation slid to 40 trillion drachmas, down 35 trillion on its recently-recorded all-time high; and annual turnover crept along at 34.6 trillion drachma, well down on the 58.6 trillion of the previous year.

The slump was unexpected given that Greek interest rates fell sharply as the country moved towards membership of the European Monetary Union (EMU). Stock market analysts were at a loss to explain what went wrong. In the end, most wrote off the share crash as a severe overreaction to an exuberant rally on the stock exchange during 1999. But they are now predicting that this year will bring a much-awaited upturn in share prices.

The ASE's president, Panayotis Alexakis, forecasts that Greece's position will be bolstered as a leading financial hub in the region thanks to its geographical position and its adoption of the euro currency. "Greece is the only euro zone country in the area and our neighbours will be able to use our capital market for their development plans," he points out. "In this sense, we promote cooperation in our region and, following a period of preparation and harmonisation, we would also like to move to a common trading system."

The government has spent two years amending the legislative framework of Greece's financial system in order to make it compatible with European standards, and this whole process has had some significant implications for the way in which the stock exchange functions. Business has been given a welcome boost by the decision to move into the derivatives market, which is based on trading in futures and stock options. Launched in August 1999, the Athens Derivatives Exchange (ADE) is a separate company in which the ASE is the single-largest shareholder, holding a 35.5 per cent equity interest. Again, in setting up this separate exchange, the main emphasis has been on ensuring that Athens conforms with international standards. "We want to show that we are a credible and reliable, safe and strong capital market.

And we also want to show that we have all of the required rules and regulations that safeguard the transparency of the market, the flow of information to both the investors and analysts, and the good behaviour of all of the major participants," explains Dr Alexakis. Reformation of the Greek financial market regulations in line with EU practices have been accompanied by government measures to restructure the economy as a whole. Dr Alexakis points out that this combination will also bring benefits for the stock exchange: "We believe that, gradually, we are going to have more stability. We also believe that the privatisation of the public sector will continue and that this will bring liquidity into the market."