(BofA-ML) GREECE: YES vs. NO Scenarios

GREECE: YES vs. NO Scenarios

 

Bottom Line: Thanos talks us through, very simply, the scenario of a YES vs. NO vote at this weekend’s referendum. He sees virtually no chance that the referendum will be cancelled. Government messages have been confrontational and confusing, trying to pin as much blame on the creditors. The referendum question itself is highly complex. Thanos believes the main driver of the result is likely to be how scared the public are after the closure of banks – more fear should increase the YES vote. If the Greek public vote “Yes”, a new government will likely need to be formed, which doesn’t look easy within the current parliament. However, in this scenario, they will most likely remain in the Euro, but restoring economic stability will be challenging. In the scenario of a NO vote, we would not expect the creditors to change their proposal for the adjustment programme in response, which would be hugely negative.

 

YES VOTE: We would expect a Yes vote to lead to substantial political uncertainty that may take time to be resolved

 

·         We do not see how the current government can implement a programme while campaigning against it in the referendum.

 

·         A new government will likely need to be formed, which does not look easy within the current parliament. It will only be possible if a substantial number of Syriza parliamentarians split from their party: With a “pro programme” arc (ND, Potami, Pasok) holding only 106 seats, 45 MPs from Syriza/Anel would have to be found.

 

·         Beyond the technical issues of whether or not general elections could be organized in the middle of the summer, a potential “political void” will keep the country in limbo. Syriza remains ahead in the polls. However, the opposition parties could decide to run together, to improve their chances.

 

·         By the time Greece has put together a government that can approve and implement an adjustment programme, the country would have missed both the IMF and the ECB payments and the economy will be in a much worse shape.

 

·         From the Europeans’ point of view, their firmness and the ensuing referendum, if won, could be a way to get to the “best of worlds”, with the adjustment programme and monetary union clearly sanctioned by the Greek people and eventually a new, pro-Europe government.

 

·         Greece will most likely remain in the Euro in this case, but restoring economic stability will be challenging.

 

NO VOTE: A No vote could increase uncertainty even more. In light of their firmness right now, we would not expect the creditors to change their proposal for the adjustment programme in response.

 

·         Without new official funding, Greece will enter uncharted territory.

 

·         Default to the IMF and the ECB will increase Grexit risks substantially.

 

·         An economy without banks, without lender of last resort, without any access to liquidity and with substantial uncertainty of what comes next will go into a deep recession.

 

·         The most negative scenarios could include social unrest and geopolitical risks.

 

Below is the exact phrasing of the GReferendum Question. It is phrased in a rather complex way. At the margin a complex question should encourage some "on the fence" voters to vote NO. Additionally, please note that NO is the first choice of the two as well, also a positive for NO, at the margin.

 

“Do you think that we should accept the framework for an agreement  that has been proposed by the European Commission, the European Central Bank, and the International Monetary Fund in the Eurogroup of 25/6/2015 and includes two parts that represent their common proposal? The first part has the title "Reforms for the completion of the current program and beyond" and the second part " Preliminary debt sustainability analysis."

 

Not approved/No:

 

Approved/Yes:


 

(ZH) Greece May Not Even Have The Funds To Conduct A Referendum

Greece May Not Even Have The Funds To Conduct A Referendum

With Europe making it very clear that unless Greece folds in the next 48 hours, there will be no deal on which the Greeks will be conducting their "Greferendum" as Greece will be programless after June 30, there has been ample confusion about just what the wording of the ballot will be to which the Greek population will say Nai or Oxi. As the following latest snapshot confirms, even the Greek side is rather confused and is now essentially telling people to vote on a deal that was proposed once (on June 25) and may or may no longer be relevant.
This takes place even as moments ago Germany's minister for economic affairs Sigmar Gabriel explained just what a No vote would entail:
  • GERMANY GABRIEL: GREEK NO VOTE A VOTE FOR EURO AREA EXIT
Even though there was clearly some confusion as the push to set the narrative begins:
  • MERKEL SAYS NONE OF US WANT TO TELL GREEK PEOPLE HOW TO VOTE
A clear lie as just moment prior we got this:
  • JUNCKER: I WOULD LIKE TO ASK GREECE TO VOTE 'YES'
Of course, Greece is quite aware of this, and it doing all it can to push voters in the desired direction as the front page of Syriza's newspaper today reveals...
... but at this point there is no alternative: since the bluffing game had to be taken beyond the point of no return and both Greece and the Troika have to last it out until the weekend.
However, the problem for Greece may not be one of wording or even maintaining the "game theory" bluff until the very end, but a far simpler one: not having the funds to actually conduct it!
According to Germany's FAZ, "the Greek Court also estimates that the referendum will cost around 110 million euros, according to a well-informed policy analyst. Money that in view of the strapped Greek Checkout simply will not be there, even if the country saves a EUR 1.6 billion full-scale default to the International Monetary Fund this Tuesday."
So a question emerges: if indeed Greece is unable to fund a referendum will it be stuck with mailed-in responses? And how long would it take to tabulate those votes: 3 weeks, 3 months? Needless to say, the cash-based Greek economy, with its €60/day daily allowance of ATM will not survive nearly that long, something the government hopefully realizes as the next wave of anger will promptly turn away from the Troika once the natitonalistic passion has died down and refocuses on the local government itself...

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: ERB -1.4%.

Select EU related names showing weakness: SAN -6%, DB -5.9%, ING -4.8%, NOK -4.6%, SNY -4.2%, E -3.9%, ALU -3.7%, ORAN -3.5%, UN -3.3%, SAP -2%

Select China related names trading lower: ZNH -7%, JMEI -6.3%, CMCM -5.1%, TEDU -4.8%, JKS -3.3%, JD -2.6%, DANG -2.1%, YUM -2%

Select oil/gas related names showing early weakness: TOT -4.3%, SDRL -3.8%, STO -3.6%, AEG -3.5%

Other news: NBG -21.9% (cont uncertainty in Greece), AGO -12.9% (NYTimes DealBook reporting Puerto Rico cannot pay $72 bln in debt), CBLI -9.2% (cont volatility), BTU -6.1% (still checking), FIT -4.1% (volatilty post IPO), RDHL -3.3% (initiates a Phase I/II clinical study in the US, evaluating ABC294640 in patients with refractory/relapsed diffuse large B-cell lymphoma), PM-2.2% (says its PT HM Sampoerna subsidiary will explore options to comply with the Indonesian Stock Exchange's mandatory requirement of a minimum threshold for public shareholding), CLDX -1.9% (independent Data Safety and Monitoring Board recommended continuation of the Phase 3 ACT IV study of RINTEGA), TWTR -1.8% (VP of Corporate Development and Strategy Rishi Garg tweets he is leaving the company)

Analyst comments: MBI -6.7% (downgraded to Neutral at BTIG Research), YOKU -5.3% (downgraded to Underperform from Neutral at Mizuho), MKTX -2.7% (downgraded to Underperform from Neutral at Macquarie), M -2.6% (downgraded to Sell from Buy at Deutsche Bank), FFIV -2.4% (downgraded to Neutral from Overweight at Piper Jaffray), QCOM -1.9% (downgraded to Sell from Hold at Drexel Hamilton), XOOM -1.8% (downgraded to Neutral from Positive at Susquehanna), JPM -1.7% (downgraded to Perform at Oppenheimer ), STI -1.7% (downgraded to Perform at Oppenheimer ), AA -1.6% (target lowered to $16 at Morgan Stanley), FBP -1.2% (downgraded to Neutral from Buy at Guggenheim), KYTH -0.8% (downgraded to Market Perform from Outperform at Leerink)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: N/A.

M&A news: KZ +6.7% (receives 'going private' offer from group led by Chairman/CEO for $8.56/share), SYY +1.6% (terminated its merger agreement with US Foods; announces $3 billion share repurchase), POT +0.7% (will not make divestments for any possible M&A deal with K&S (KPLUF), according to Reuters), .


Other news: PETX +17.9% (nnounces positive results from its pivotal field effectiveness study of capromorelin for appetite stimulation in dogs), WYY +6.5% (enters strategic alliance with Samsung (SSNLF) SDS America that enables WidePoint Certificate-on-Device digital certificates for use on Samsung Galaxy S devices), SYN +5.2% (initiates a Phase 2 clinical trial of SYN-010 to treat irritable bowel syndrome with constipation), SRPT +1.3% (completes NDA Submission to FDA for Eteplirsen)

Analyst comments: MUX +7% (assumed with a Buy at H.C. Wainwright ), PTX +3.4% (initiated with a Buy at Brean Capital; tgt $17)