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Axia Ventures

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Axia Ventures Group said that despite the significant efforts made in 2010 and the bold reform agenda set for this year, Greece is failing to dissuade potential “debt restructuring” concerns of investors. 

Even with a high probability that Greece is granted an extension of the repayment period of the EUR110bn loan from the EU/IMF/ECB at potentially a lower rate, this is not enough to bring back confidence in sovereign debt sustainability, according to a report.

Only a comprehensive solution that involves all the EU peripheral economies will provide the necessary support for Greece. In order for this solution to instill confidence, it must be able to quell Greek default speculation and provide enough time to allow the economy to achieve sustainable growth potential, says Axia Ventures Group.

The firm highlights the potential upward GDP revaluation within 2011, assisted by the new tax law that will help the country reduce its debt/GDP to more sustainable levels, while the privatizations scheme aimed at raising up to EUR50bn is considered “very ambitious”. However, the effort should grab investors’ attention and should be appreciated by the markets. 

Axia states that government’s economic plan could work, but it needs time and leaves no margin of error. In addition, even if everything is executed flawlessly, the debt levels would still remain high and would prompt investors to contemplate different “debt restructuring” scenarios. 

According to Axia Ventures, the market has priced-in a very pessimistic scenario for the country. The combination of sovereign risk worries and weak macroeconomic outlook is expected to continue to weigh on Greek equities in the short-to-medium term. 

Greece has avoided the “default” scenario and now is in a transition period that could result in a comprehensive and sustainable debt solution coupled with growth. Despite the challenges ahead, a dim light has started to appear at the end of the tunnel, as there is value in specific equities and that could present a significant opportunity to investors with high conviction to enter the market ahead of the curve.

Axia Ventures comments that risk and opportunity go hand in hand and its picks include Mytilineos Group, OTE, PPC, Intralot, Folli Follie Group, Ellaktor, Gek Terna, Hellenic Exchanges, OPAP, Jumbo and Coca Cola Hellenic.

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