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HSBC: 8 Top Picks For H1 2010

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HSBC sees that macro themes will dominate Greek equities in 2010 and it expects the market to be range-bound for as long as macro visibility remains poor. Greek equities are set for a re-rating should macro risks subside.

Its top picks for H1 2010 are OPAP, Bank of Cyprus, Jumbo, Ellaktor, Intralot, Metka, GEK Group and Hellenic Exchanges

The brokerage notes that the global macroeconomic crisis has focused attention on Greeces macro fault lines, notably a triple deficit: fiscal (unsustainable budgetary calculus), external (competitiveness erosion) and credibility (poor fiscal track record and statistics quality).

“We argue, though, that not all is dark: Greeces economic imbalances are not unprecedented. However, although providing a shield against headwinds, EMU membership also eliminates  easy ways out: budgetary discipline and structural reforms are urgently needed. We adopt a constructive near-term base-case, implying some  progress in fiscal adjustment but at the expense of a weak growth recovery.”

HSBC believes that macro factors will, by and large, drive market performance this year, much as they did in the recent past and ultimately 2010 will be a tug of war between macro risk levels (captured in sovereign bond spreads) and earnings levels.

“In our view, current consensus forecasts are likely to prove high, but, we think that the country risk premium is also too high. On our calculations, every 5% reduction in EPS forecasts is cancelled out by a 25bps fall in sovereign bond spreads,” HSBC stresses.

Its top picks for H1 2010 are:
 
 OPAP (OPAr.AT, Overweight (V), TP EUR23.0)
 Bank of Cyprus (BOCr.AT, Overweight (V), TP EUR6.5)
 Jumbo (BABr.AT, Overweight (V), TP EUR11.2)
 Ellaktor (HELr.AT, Overweight (V), TP EUR8.0)
 Intralot (INLr.AT, Overweight (V), TP EUR5.1)
 Metka (MTKr.AT, Overweight (V), TP EUR13.0)
 GEK Group (HRMr.AT, Overweight (V), TP EUR10.6)
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