Market Comment - In the Spotlight by Manos Chatzidakis

Market Comment

Stocks continued to head south on Tuesday, as they have done since the beginning of the month, taking the benchmark to its lowest level in the last 13 sessions. That was the third negative close in a row (-5.1% from local highs) while volumes have retreated below €100m accordingly.

We expect a technical bounce in the beginning of the session although the absence of any new catalysts may keep volatility high during the day.

In the Spotlight Greece:  The Greek economy is expected to shrink by 4.0 pct this year, from 6.4 pct in 2012 and to return to positive growth rate in 2014 (0.6 pct) rising to 2.9 pct in 2015, the European Commission said in its autumn forecasts report released on Tuesday.  The EU's executive arm, in its spring forecasts had predicted a 4.2 pct economic recession in Greece and a 0.6 pct recovery next year.  The Commission said Greek unemployment was expected to rise to 27 pct this year (unchanged from May's forecasts) from 17.7 pct in 2011 and 24.3 pct in 2012, falling to 26 pct in 2014 and to 24 pct in 2015.  The country's fiscal deficit is projected to rise to 13.5 pct in 2013 (reflecting a bank recapitalization cost) falling to 2.0 pct in 2014 and 1.1 pct in 2015, while the Greek public debt is expected to rise to 176.2 pct of GDP this year, from 156.9 pct in 2012, falling to 175.9 pct in 2014 and 170.9 pct in 2015. Greece is expected to remain in a deflation trend this year (-0.3 pct) and 2014 (-0.4 pct) and to return to positive inflation rates in 2015 (0.3 pct).

Greece/ Overdue payments: The general government’s overdue debt to the private sector fell to 5.989 billion euros in September from 6.167 billion euros in August, official figures showed on Tuesday. A report by the Finance ministry said that pending tax returns by the state totaled 643.2 million euros in September from 409.4 million euros the previous month. Overdue debt by government ministries totalled 370 million euros in September, up from 362 million in August, local authorities’ overdue debt was 712 million euros (down from 760 million euros), state hospitals’ debt fell to 1.095 billion euros from 1.150 billion euros, pension funds’ debt eased to 3.547 billion euros from 3.609 billion euros and other legal entities’ debt fell to

265 million euros from 286 million euros.

Greece/PDMA: Greece sold 1.3 billion euros of six-month treasury bills on Tuesday to roll over a maturing issue, the country's debt agency PDMA said. The T-bills were priced to yield 4.15 percent, unchanged from an October auction. The sale's bid-cover ratio was 1.86 down from 2.04 in the previous sale.

Banking Sector: According to press reports Greek authorities are assessing a proposal involving a voluntary exchange of warrants with bank shares given the strong interest shown to date by investors in Greek banks.  Under this framework HFSF can unlock (separate) the stocks it holds from the warrants and make them available to private placements to investors. A possible alternative scenario to the abovementioned is that, HFSF asks for the investors to exercise their warrants with discount to the predetermined exercise price.

Eurobank: Eurobank on Tuesday announced that it has launched a voluntary redundancy scheme with the aim of cutting 700 jobs from the group until November 15. Mytilineos:  Mytilineos in reply to the Hellenic Capital Market Commission’s letter concerning RAE's Permanent Arbitration Tribunal on the supply of electricity by the PPC to the Company’s subsidiary announced that the the impact of the Decision’s implementation with retroactive effect on the financial results of Aluminium are calculated at €35.2 million for the period from 01.07.2010 to 30.062013. More specifically, €29.0 million refer to the period from 01.07.2010 to 31.12.2012 and €6.2 million refer to the period from 01.01.2013 to 30.06.2013.  As a result of the advance payments made by ALUMINIUM S.A. during the period from 01.07.2010 to 30.06.2013, the amount of €43.7 million (pre tax) is owed by the PPC. We note that this development brings total amount of cost cutting to $140m for AoG, very close to the $150m target (“Mellon program”) the management has set in the beginning of 2013. Coming to this target the average cost for Aluminium is dropped to 1.800 $/tn which is very completive amongst other smelters (on average 2200 – 2400 $/tn).

Public Power Corporation: PPC announced that its third quarter 2013 financial results will be burdened, as a result of the Decision no RAE/D1/2013 of the Permanent Arbitration at RAE relating to the supply of electricity to Aluminium of Greece for the period 1/7/2010-30/09/2013, with an estimated amount of €109m 

The application of the abovementioned Decision results into a cash obligation of PPC towards AoG estimated at € 4 mln approximately as of 30/09/2013. It is noted that the aforementioned cash effect does not include PPC's receivables and claims from ALUMINIUM which are mentioned in the published financial results and are not ruled by the Arbitration Decision.

PPA: According to an official statement cruise passengers rise by 13.7 in Jenauary – October period.