Greek Stocks Soar Most in More Than Two Decades as Banks Merge
Aug. 29 (Bloomberg) -- Greek stocks rallied, with the benchmark ASE Index climbing the most in more than 21 years, as EFG Eurobank Ergasias SA and Alpha Bank SA announced a merger.
Eurobank and Alpha Bank each jumped by the allowed daily limit of 30 percent after saying they will combine and sell new equity to strengthen their capital in an attempt to weather the debt crisis. Larger rival National Bank of Greece SA gained the most on record while Piraeus Bank SA had the steepest advance in almost 18 years.
The ASE soared 14 percent to 1,006.59 at the 5 p.m. close in Athens, the best daily performance since April 1990. The benchmark gauge has still slumped 81 percent since October 2007 and is the worst performer in 2011 among 24 developed-markets indexes tracked by Bloomberg News as the global financial crisis and Greece’s debt woes eroded the value of the country’s banking assets. The 22-member Cyprus General Market Index surged a record 18 percent today.
“Consolidation in the domestic sector makes economic sense given the fragmentation of the market,” Deutsche Bank AG analysts Dimitris Giannoulis and Carlos Berastain Gonzalez wrote in a report to investors dated today. “We would expect the market to react with enthusiasm following the recent pressure on the sector but we maintain our cautious stance ahead of the necessary re-capitalization of the new group.”The same happened when the TARP was first announced: US equities rallied 8% in a day...
Of course, when something as silly happens, all the analysts, strategists and talking heads will come out with bullish and positive comments. The only problem is that these kinds of bounces are bad signs.
Well, let's the see the result just three days later (chart courtesy of ZeroHedge):
And you can be sure that by Monday morning, the whole thing will have been retraced.