Thursday 24 March 2011

Greek retail investors seeking refuge abroad...?

Anyone casting even the most fleeing glance at the ASE (Athens Stock Exchange) must have heard loads of stories lately about how an ever increasing number of local retail investors are seeking superior returns, or whatever it is that they seek, in foreign stock exchanges. Well, here is a bit of evidence about this developing trend, always from a macro perspective…


source: Bank of Greece


A little background, portfolio investments data from the Balance of Payments capture flows directed at acquisitions of portfolio assets (stocks, bonds etc.). The downside is that relevant data do not discriminate between retail and institutional investors. To sum up the chart, a bit before the Greek crisis broke out and consistently ever since, there has been a constant buying of foreign portfolio assets by Greek investors. It seems like the current situation is assisting Greek investors in breaking free from “home bias”.

On the other hand in the aforementioned period, there is a persistent exodus of foreign capital from the country. Local as well as foreign capital is exiting the country and this can never be a good thing. Even if the period was not that tense, Greek government’s handling of dividends and capital gains taxation would go some way into sending local retail investors abroad.

P.S. Data from Greece’s International Investment Position helps us determine a bit better institutional and retail investors’ behavior. The chart shows foreign stocks holdings in mlns of Euros.


source: Bank of Greece


I am a bit apprehensive about what part of the rise in foreign stock holdings, pictured in the graph, are due to appreciation or depreciation of the assets involved. What strikes me as weird is that the holdings of financial institutions did not decline during the 2008-early 2009 markets crash.

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