Article / 31 May 2012 at 9:16 GMT

Greek election: Outcome sensitivity - plus 10 stocks to consider

Strategist & Equity Analyst / Private
Denmark

Greeks will vote again on June 17, and the results will help determine the future of the euro. Will the new government back austerity and a bailout?  

Below I've created a chart with the results of the most recent Greek poll: closer to the election there will not be any official polls, but expect large professional investors to make their own and invest accordingly.

In table 1 I have lined up the parties with enough votes to enter the parliament. The conservative and pro-bailout New Democracy is in the lead with 23.4%, just an inch ahead of the leftist anti-bailout party Syriza with a backing of 22.1%.  The third “large” party is the social democratic pro-bailout PASOK backed by 14.3%.

Greek Election Poll 17 June

Now we need to take a careful look at the Greek system.  While there are 300 seats in the parliament, 50 are reserved for the largest party, leaving 250 seats to be split according to votes. I've translated the poll above to possible numbers of seats in the chart below.  I've added 50 seats next to New Democracy, as this is the largest party in the poll. 

 Greek Poll June election

 If the poll holds, then 55% of the votes would back a bailout, while 45% would be against.

 Pro or Anti Bailout backing

The result is VERY sensitive to changes in backing, as the reinforced proportionality (the 50 mandates) goes to the largest party, and the two most popular parties are on opposite sides of the bailout issue. At the moment 9.85m Greek voters are eligible and at the May 6th election 65% turned up to use their right to influence.

Taking these numbers in connection with the poll, then only 42,000 votes would have to switch from New Democracy to Syriza to change the results entirely. 

10 stocks to consider
If the new Greek government backs the bailout package, there might be some opportunities on the Athens exchange. Most analysts have lost interest in Greek stocks, and this makes my screener less sophisticated, as the usual numbers to tweak are not available. But anyway, using the Saxo Stock Screener, I have extracted stocks with little net debt, as debt can be dangerous at the moment. Secondly, I selected stocks which had positive earnings last year shown as the net income margin. This is not a guarantee for earnings in 2012, but it gives a flavour. As an-add on, I show the Price Earnings ratio for 2011 and the performance in 2012.

Some of the stocks are very small in market cap terms after steep declines, but I have included them anyway. See table 2.

 Greek stock screening
I have written two previous articles on investing in Greece:

  1. Invest in Greece
  2. Greek stocks – 10 shares to look at

 

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