by Nicolas Bornozis, Capital Link,Inc, www.capitallinkgreece.com
Market News
Greek stocks increased this week by 2.01% closing at 2466.89 points. The FTSE/ASE 20 Index increased by 2.09% closing at 1354.56 while the FTSE/ASE 40 realized a gain of 2.70%, ending the week at 2043.31 points. The FTSE/ASE small cap 80 Index increased this week by 3.03% closing on Friday at 446.87 points.

Economic News

Greek building construction activity
According to the National Statistics Service, Greek total building construction activity registered a 5.6% rise in June 2004 in volume terms, following a 3.5% rise in May in volume terms as well as following an 11.1% decline in April. We recall that Greek total building construction activity in the January – December 2003 period raised 2.3% y-o-y in volume terms (though posting a 0.1% decline in terms of new building permits). Construction activity, as measured by the number of new building permits, rose 8.3% year-on year in June 2004. 8,492 new permits were issued nationwide in June, corresponding to 7.9m cubic meters, compared with 7.46 million cubic meters in the same month a year earlier. Total building construction activity registered a 7.2% decline in the first 6 months of the year in volume terms (-0.6% in terms of new building permits and –5.5% in terms of surface), following a10.2% decline in the first 5 months and a 13.7% decline in the January-April period. Private construction activity in June rose 13.1% in volume terms following a 2.6% rise in May and a 9.5% decline in April, while dropped 5.2% y-o-y in volume terms in the January- June period.

Balance of Payments
According to the Bank of Greece, in the January-August 2004 period, the current account deficit narrowed considerably by EUR1,583m over the same period of 2003, falling to EUR 3,146m. This development mainly reflects a substantial rise in the services surplus and, secondarily, an increase in the transfers surplus, which more than offset the strong rise in the trade deficit. The trade deficit grew by EUR 1,820m relative to the same period of 2003. Specifically, a EUR 2,354m (or 12.9%) increase in the non-oil import bill more than offset a EUR 879m (or 13.9%) rise in non-oil export receipts, whereas the net oil import bill increased by EUR 345m. In August 2004, the current account showed a surplus considerably bigger than the one in August 2003. This improvement is mainly due to a large increase in the services surplus and – to a much lesser extent – to a rise in the transfers surplus. On the other hand, both the trade and the income account deficits grew.

Bank of Greece interim report
Bank of Greece, in its interim report on the Greek economy, said that the Greek economy is expected to grow by 4% this year from 4.5% last year. BoG cites developments on the fiscal front and in labor costs among the causes of concern especially as far as inflation is concerned. Bank of Greece in its interim report presented yesterday to the Parliament said that the general picture of the Greek economy is good, with satisfactory growth rates especially when compared to the eurozone averages. However, high unemployment and inflation remain some of the country’s main problems. Bank of Greece said that economic growth may slow down in 2005 however, it did not provide any figure. We recall that the government is targeting GDP growth of 3.9% in 2005. Concerning the general government deficit, BoG said that the government’s goal of a budget deficit of 2.8% of GDP in 2005 (from a high of 5.3% this year) is “satisfactory and necessary”. In addition, the central bank announced that Greek households are currently defaulting on EUR 2.5bn worth of loans and when combined with business loans then the amount climbs at EUR 7.8bn or 5% of the country’s GDP. Delayed personal loans payments rose to 8.3% of the total owned from 8% a year ago, and the rate of loans being granted increased by 37% this year vs. last year. Approximately 6.9% of all Greek bank loans at end June were non performing for more than 3 months. Greek banks had set aside provisions for only half of those loans, the bank said. Moreover, more than 8% of consumer loans (EUR 1.21bn) were non performing for more than 3 months, raising concerns ahead of the anticipated uptrend in interest rates. As regards structural reforms, BoG Governor urged for reinforcement of the competition in the electricity sector and domestic marine transports sector, while also highlighting the need for liberalization of the natural gas market and the reduction of state involvement through privatizations.

European Commission
The European Commission said that it is considering legal action against Greece over its failure to provide reliable budget figures. We recall that Greece revealed massive revisions to budget data of the previous years, which pushed its deficit above the EU limit of 3% of GDP for every year between 2000 and 2003. According to an information note presented to the EC by European Monetary Affairs Commissioner Joaquin Almunia, “The Commission is also preparing an infringement procedure against Greece given its inability to provide figures in light with the ESA accounting rules’. Almunia said that the European Commission will propose new rules to give Eurostat the right to check national budget data directly in response to cases of misstated statistics. Greek Finance Minister said the country met the European Union’s budget deficit criteria before it entered the euro zone despite recent revisions and is awaiting Eurostat’s conclusions on the matter. We recall that Eurostat is searching into Greece’s fiscal shortfall in 1997-1999 – important years in the country’s course to euro membership.

Corporate News

PIRAEUS BANK
Piraeus Bank announced that it has successfully issued a Hybrid Tier 1 Euro-denominated Bond in the amount of 200 million through its subsidiary Piraeus Group Capital Ltd.The bond is perpetual and callable after ten years. It carries a coupon of 3-month Euribor + 125 basis points. This issue, in conjunction with the 3-year Senior FRN and the 10-year Lower Tier 2 Subordinated FRN lengthens the maturity profile of the Bank’s debt. At the same time, the Lower Tier 2 and Hybrid Tier 1 issues further broaden Piraeus Bank’s capital base. Joint Bookrunners on the transaction were ABN AMRO Bank N.V., Alpha Bank S.A. and Morgan Stanley & Co. International Limited.

EMPORIKI BANK OF GREECE
Emporiki Bank of Greece, rated Baa1/BBB-/BBB+, launched yesterday a highly successful inaugural EUR 400 million 3-year FRN transaction through Emporiki Group Finance PLC. The deal was launched under the Bank’s EMTN programme. The pre-marketing period involved a one-week roadshow in the UK, France, Germany, Portugal, Italy and Greece. The issuer originally planned a EUR 300 million deal. The issue was 1.7 times oversubscribed and Emporiki Bank decided to satisfy some of the additional demand by upsizing the transaction. The issue attracted strong international demand from 47 accounts in 12 regions. Three quarters of the demand came outside Greece, with France, Italy, the UK and Germany accounting for over 50%. The rest was sold to investors in Austria, Benelux, Cyprus, Portugal, Switzerland, Israel and Taiwan. The issue caries a coupon of 3-month Euribor + 30 basis points, matures on November 1, 2007 and will be listed on the Luxembourg Stock Exchange. The Joint Lead Managers were Banc of America Securities, CALYON and Deutsche Bank. The Senior Co-Leads on the transaction were Emporiki Bank and Natexis Banques Populaires, and Co-Leads were Alpha Bank, BCP, BNL, EFG Eurobank, Greek Postal Savings Bank, NBG, Piraeus Bank and UBM.

HELLENIC EXCHANGE HOLDINGS S.A.
HELLENIC EXCHANGES HOLDING S.A. (HELEX), in its effort to keep foreign institutional investors informed about the company, participated in the conference “Greek Day”, which was organized by Citigroup in London. Various companies of middle and small capitalization coming from Greece, the United Kingdom, Spain, France, Germany and Italy participate in the aforesaid conference. The management of HELEX presented the financial results as well as the strategy of the company, both during the conference and through one on one meetings. International investors have expressed a great interest for the share of the company and its prospects, which are geared to the medium-long term prospects of the Greek capital market. It is noted that foreign institutional investors hold currently more than 20% of the share capital of HELEX.