by Nicolas Bornozis, Capital Link,Inc, www.capitallinkgreece.com
Market News
Greek stocks increased this week by 1.94% closing at 3019.09 points. The FTSE/ASE 20 Index increased by 2.18% closing at 1693.83 while the FTSE/ASE 40 realized a gain of 2.69%, ending the week at 2527.22 points. The FTSE/ASE small cap 80 Index increased this week by 1.59% closing on Friday at 474.02 points.

Economic News

MSCI Index changes
Changes in MSCI Standard, MSCI Small Cap as well as Euro and Pan-Euro indices became effective. More specifically, Hellenic Exchanges is added to the MSCI Standard Greece Index with a free float factor of 65%. No deletions take place. Moreover, Cosmote’s free float factor increases to 40% (from 35% previously), Folli Follies’ to 50% from 45%, Germanos’ to 70% from 60% and Hellenic Technodomiki’s to 75% from 70%. Regarding the MSCI Small Cap Index, Sarantis and Ethniki Insurance are added, while Elval, Sidenor and Iasso are deleted. Also, OPAP will participate to the MSCI Euro and Pan Euro blue chip indices with a 50% free float factor. Some portfolio restructuring on the back of these changes should not be ruled out.

Public private partnership bill
During a cabinet meeting an initiative aimed at attracting the private sector into the construction of public work projects was finalised. The draft law is expected to be approved by Parliament over the next few months. By then, public bodies that wish cooperation with the public sector are expected to have made their interests known. The bill concerns projects costing up to EUR 200m. Private companies will have to contribute part of the funding of the projects and provide their services for which they will receive compensation. Note that the government in March presented a plan to expand Greece’s highway network by 50% through partnerships with the private sector. The country has so far completed 3 PP projects; Athens Int’l Airport, Attiki Odos and Rio-Antirio bridge. In the UK some 600 PPP projects have been completed in the last 10 years.

Privatisations are speeding up in Greece
The Greek government is speeding up privatisation procedures. The government’s plans could be summarised as follows: The sale of 10% of its shares in the country’s main telecoms provider, OTE, by the end, of August. The government would retain a blocking minority in the company and would not reduce its holding below 34%. The 10% stake in OTE will come from maturing share convertible certificates. The sale of an up to 10% stake in Agricultural Bank. The partial privatisation of Postal Savings Bank through its listing on ATHEX. There are no details on the size of the stake to be offered to private investors. The listing will take place at the end of this year. Athens International Airport will be listed in the ATHEX within 2006. Moreover, the government is planning to sell 17% of its share in OPAP to private investors in July. The Government hopes to raise some EUR 1.6bn privatisation revenues this year.

Greek PMI showed a slight improvement
The seasonally adjusted Purchasing Managers’ Index (PMI), based on a survey of about 300 companies, showed a slight improvement in overall business conditions in May, settling at 50.2 (above the 50 level that separates growth from contraction) from 49.1 in April. Total output rose for the 18th consecutive month in May. With domestic demand remaining subdued, the level of total new orders was bolstered by stronger demand from foreign clients in the latest survey period. Average purchase prices rose for the 23rd consecutive month, with 15.6% of all firms reporting a rise in costs from one month ago. Total employment in the Greek manufacturing sector fell for the ninth successive month in May. The eurozone manufacturing sector contracted for a second month in May as output and exports shrank in two of the bloc’s top three economies, France and Italy, but not in Germany. The NTC Research Eurozone Purchasing Managers’ Index fell to a 22-month low of 48.7 in May from 49.2 the previous month, staying below the 50 level and coming in below a consensus forecast of 49.0.

Banks’ pension liabilities issue
Banks and employees union (OTOE) will meet in an attempt to reach a mutually agreeable position on the pension liabilities issue. There will also be a meeting between Emporiki’s management and employees union. OTOE is objecting to the solution proposed by the government involving the creation of an auxiliary pension fund for Emporiki and Agriculutral Bank, as they believe that no pension fund could be disbanded by legislation but rather through the agreement between the founding parties (employees and the bank).

Greek fiscal budget deficit narrowed in the January-April period
Greece’s central government budget deficit (excludes the finances of the state pension system and local administrations) narrowed to EUR 5bn (-11%) in the January-April period from EUR 5.6bn a year earlier. In the January-April period, net revenues grew 2.6% against a target of 11.4%, on lower-than expected value added tax receipts, while expenses rose 4.7% against a target of 4.6%. Ordinary expenses registered a 3.1% advance. Investment spending tumbled to EUR 1.3bn from EUR 2.4bn last year. The country needs to bring its general government budget deficit to below 3% by 2006 from 6.1% in 2004 (% GDP). Recall that the country’s deficit exceeded the 3% threshold every year since it qualified for the euro in 1999.

Greek PPI slowed to 4.3 %
According to the National Statistics Service (NSS), Greece’s producer price inflation slowed to 4.3 % year-on-year in April from 4.7 % in March. Month-on-month, producer prices rose 0.9 %, while the 12-month average producer price inflation to April was running at 4.5 % year-on-year.

PIRAEUS BANK
Piraeus Bank announces that, following the receipt of the approvals from the Bank of Greece, the Bank of Egypt and the Egyptian Capital Market Authority, it launched yesterday a public tender offer for the acquisition of 75% to 100% of the share capital of Egyptian Commercial Bank (E.C.B.) through the Cairo Stock Exchange. The offered price per share is EGP 20 (Euro 2.804), while the total number of shares equals to 9,626,122. After the successful completion of the acquisition, a share capital increase of E.C.B. will follow, which is expected to be executed by the end of June 2005.

LAIKI BANK
The Cyprus Popular Bank Ltd announces that it has reached a joint agreement with the Bank of Cyprus Group for the sale of the 35% share capital of the company Universal Life Insurance Co Ltd which is currently owned by the Laiki Bank. The sale price is £1.99 cent per share and the total amount receivable in cash by Laiki is £9.2m. The agreement is subject to certain conditions and pre-requisites, which include the approval of the relevant authorities in Cyprus and Greece.