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London - Bailed-out Greece is luring back foreign investors betting on more gains in its bank-dominated stock market and an eventual economic recovery, Thomson Reuters data shows.
Athens remains a market more for the likes of hedge funds than mainstream foreign investors, and some fund managers say Greece will take time to shake off its reputation for being bust.
Nevertheless, the benchmark Athens Stock Exchange General Index, one of Europe's smallest by market capitalisation, is up 24% since the start of 2013, beating gains of 15% on Germany's DAX and 11% on the pan-European FTSEurofirst 300 index.
Share trading by foreign investors on the exchange has jumped to about 50% of turnover from a low of just over 20% in 2012 at the height of the Greek debt crisis, which culminated in international bailouts totalling €240bn ($324bn).
After a six-year slump which has wiped a quarter off economic output, the government is forecasting a return to economic growth in 2014. The stock market is still worth almost a fifth less than before the crisis, and investors are snapping up stocks that should benefit from a recovery, from banks to telecoms.
"Turnover has increased dramatically in both Greek stocks and bonds, and the market is coming back to life," said SteppenWolf capital chief investment officer Phoebus Theologites.
Greece, excluded from capital markets since 2010, still faces big problems. Unemployment is close to 28 percent and progress with privatisation has been slow.
Clairinvest fund manager Ion-Marc Valahu, whose Greek holdings include Hellenic Telecom and gambling group OPAP, said many mainstream pension funds were unwilling to enter a market they still regard as too risky.
"Those funds cannot go to their retail clients and say we're putting 10% in Greece. The perception that the country is bust hasn't changed for many," he said.
Yet US investment bank Citigroup wrote in a research note this week that it felt "the worst is behind us" after meeting major Greek banks and policymakers.
Greece had a €2.6bn central government surplus in the first nine months of 2013, excluding debt servicing costs, putting it on track to hit fiscal targets that will allow it to seek further debt relief from its international lenders.
"We see signs that things are getting better," Athens exchange chief operating officer Dimitris Karaiskakis told Reuters at a Marketforce conference in London this week.
Greece is also due to join the MSCI emerging markets index in November, which would open it up to funds benchmarked to that index.
Betting on the Athens stock exchange is mostly a play on a recovery in Greek banks, which comprise about 40% of the benchmark index, compared with 20% in 2012.
Greek Coke bottler Coca Cola Hellenic's decision to move its primary listing from Athens to the bigger FTSE 100 in Britain extended banks' domination of the Athens market.
While this relative lack of diversification may put off some investors, others who are prepared to take on the risk have found this a rewarding bet since banks tend to outperform when equity markets rise.
Greek banks underwent huge upheaval during the economic slump, leaving three main players - Piraeus, National Bank of Greece and Alpha, all of which are largely owned by a bailout fund.
A fourth, Eurobank, is almost entirely owned by the Hellenic Financial Stability Fund (HFSF).
The banks are still burdened with bad debts as a result of the crisis, which also led to a drop in deposits as money fled the country.
Non-performing loans total 28% across the four banks, which will undergo two further rounds of stress tests. This year U.S. consultant Blackrock and accountancy firm Ernst & Young is conducting a review commissioned by the central bank. In 2014 the banks will also participate in a pan-European stress test.
Still, the FTSE Greek Banking Index has risen about 60% since July as the sector has been buoyed by injections of capital from a rescue body - the Hellenic Financial Stability Fund.
BCM & Partners Chief Investment Officer Matteo Pusineri said Greek banks would benefit from moves by European regulators to stabilise and shore up banks after the euro zone debt crisis.
Weekly trading volumes on the Athens bourse have picked up, reaching a peak so far in 2013 of 678 million shares, up from a high of around 400 million in 2012.
"From clients' point of view, they are getting a lot more positive about it. I think there's large capital returns to be made in Greece," said EGR Broking managing director Kyri Kangellaris, whose firm includes Greek nationals among its customer base.
Others are looking outside for greater safety. "Greek companies are still in convalescence. There are better opportunities elsewhere in the southern periphery of Europe, such as Italy," said Paris-based Gregoire Laverne at Roche Brune Asset Management.
