ATHENS • Greece's stock market reopened yesterday after five weeks to the most savage wave of selling in decades, underlining a crisis that has crippled the economy and pushed the country's euro membership to the brink.
Greece's bruising fight with its international creditors also sent economic sentiment to its lowest level in nearly three years in July and knocked manufacturing activity down to record lows, data released yesterday showed.
"Manufacturing output collapsed in July as the debt crisis came to a head," said Markit economist Phil Smith. "Although manufacturing represents only a small portion of Greece's total productive output, the sheer magnitude of the downturn sends a worrying signal for the health of the economy as a whole."
Banks led the plunge as the bourse reopened following the shutdown, which was due to capital controls to prevent the lenders from bleeding more deposits. Piraeus Bank and National Bank of Greece sank 30 per cent, the daily maximum allowed by the Athens Stock Exchange. The benchmark ASE Index fell as much as 23 per cent.
"The situation in Greek equity markets will have to get a lot worse before it gets better," said Mr Luca Paolini, Pictet Asset Management's chief strategist in London. "There are still critical risks to be resolved."
The sell-off shows the scale of the crisis still facing Prime Minister Alexis Tsipras as he negotiates a third bailout with creditors after six months that have put unprecedented strain on the Greek economy and its financial system.
The Greek market came to a halt in June as Mr Tsipras ended talks with the euro zone to ask voters to decide in a referendum whether to accept the terms offered in exchange for emergency loans.
The move snuffed out a short recovery in stocks, which have now lost more than 85 per cent of their collective value since 2007. Traders in Athens said the market could not function properly because of continual halts as prices plummeted.
Mr Stavros Kallinos, head asset manager at Guardian Trust, said from Athens: "It's a total disaster, it's like hell here. You can't have a market working properly with capital controls. It will be a gradual process. We're moving forward, but a step at a time."
The Greek government was forced to shut banks and impose capital controls before ultimately accepting a deal for bridge financing to avoid defaulting, even after voters on July 5 rejected more austerity and sided with Mr Tsipras.
Banks reopened on July 20 with limited services and restrictions on cash withdrawals still in place, while officials worked on rules to resume stock market trading.
Greek traders can buy stocks, bonds, derivatives and warrants only with new money such as funds transferred from abroad or earnings from the future sale of shares, or from existing investment account balances held at Greek brokerages, the Finance Ministry said.
No such constraints apply to foreign investors, provided they were already active in the market before the shutdown.
Some bond trading had been going on during the closure.
BlackRock Inc, the world's biggest money manager, bought Greek debt in the days following the nation's agreement with its creditors, according to Mr Michael Krautzberger, head of euro fixed income for the company in London.
Trading remains scant. About €102,000 (S$153,700) of Greek government bonds changed hands on the Luxembourg bourse last week, according to Mr Guy Weymeschkirch, head of markets and surveillance at the exchange. That is similar to the volume before the bourse suspended trading at the end of June.