The significant underperformance of the Greek stock market during 2011 (-52%) reflected substantial uncertainty regarding the country's economic recovery path, the effectiveness of fiscal adjustments made during the year as well as mounting concerns about debt issues in various sovereigns across Europe.

A multifaceted economic crisis has unfolded in three main areas (a) sovereign debt issues -- debt sustainability and capacity as a country to produce positive economic returns through structural and fiscal reforms, (b) banking sector issues– sovereign debt exposure and deteriorating loan quality have seriously affected balance sheets, funding conditions and capital requirements and (c) under-investment issues– the necessary element that will put the economy back on the growth track and instil market confidence towards a sustainable recovery.

During these turbulent times, we maintain exposure in selected non banking names for the largest part of 2012 and expect to reevaluate our stock picks towards the end of the first half of the year or until balance sheet repair in the banking sector is reasonably secured. Post recap, opportunities may arise in financials as well. Earnings momentum in the banking sector remains particularly weak with considerable negative tail risk. Elsewhere in the economy, there are limited signs of growth re-acceleration, mainly supported by cost cutting. Still there are certain sectors/business models capable of withstanding recessionary pressures going forward.

Eoin Treacy's view As long as negotiations with Greece's creditors remain unresolved there will continue to be speculation about the prospect of an unruly default. However, if we accept that default is a fait accompli then the only question is what the fallout is likely to be. The ECB is doing everything it can to erect a dampener for any negative repercussions by making huge amounts of liquidity available. In the event that this is not enough, the central bank can be expected to release even more. Everything will be done to mitigate the risk of contagion to other sovereigns and the wider financial sector.

The Greek ASE Index rallied from above 600 to more than 800 in January. It pulled back somewhat over the last week and will need to hold above the January low if base formation development is to be given the benefit of the doubt.