The Olympic Games are already boosting economic growth in Greece but there are few gold medal performers in the country's battered stock market.

A member of the euro zone since January last year, Greece is expected to grow about three times as fast in 2002 and continue to out-perform in the years leading to the Athens Games in 2004 with Gross Domestic Product (GDP) seen expanding at around 4.5 per cent.

But you couldn't tell by looking at its equities market. The Athens stock exchange's benchmark index is down 18 per cent at 2,121 points this year, and 67 per cent below its September 1999 all-time peak at 6,484 points.

"The way things look, it will be tough for stocks to win a medal in the race for returns," said broker Dimitris Sideris at Beta Securities. "The ingredients are there - reasonable valuations, strong GDP growth, low interest rates. Money so far is staying out, but things could change."

According to Alpha Bank, the Olympic Games are expected to boost GDP by more than one percentage point in 2004, with their contribution in the years leading up to the event and immediately after it seen at around 0.5 per cent.

Investment outlays related to the Games are estimated at about €4.4 billion ($4.26 billion) with infrastructure upgrading helping to give Athens the look of a modern European capital.

Apart from its new airport and subway system, hotel, sports facilities, a tram network and roads will have to be built.

Greece is already a growth euro star based on the pace of economic activity. In the first quarter this year GDP expanded by a provisional 4.3 per cent with the government forecasting the economy will grow by at least 3.8 per cent in 2002.

In contrast, the 12-member euro region is expected to grow at around 1.3 per cent.

"As the global economy flirted with recession in 2001, the country's GDP growth remained comfortably above four per cent," said Morgan Stanley economist Vincenzo Guzzo.

"We expect it to ease marginally to 3.6 per cent this year and regain momentum in 2003 on sustained global demand."

While high GDP growth means an improved corporate earnings outlook and therefore lower price-to-earnings (P/E) multiples, why are Greek stocks stagnating, unable to show vitality?

The answer, market watchers say, rests on a confluence of negative factors including the downturn in world equity markets, liquidity constraints, uninspiring earnings growth and retail investors getting their fingers burned after a three-year slide.

"The majority of retail investors taking part in the 1999 boom were inexperienced. The three-year bear run that followed resulted in a growing distrust of the market," said analyst Petros Tegopoulos at Axon Securities.

Greece's stock market has become a victim of its own negative momentum in the last three years after scoring gains of 102 per cent in 1999 and 86 per cent in 1998.

Its steep fall, once the bubble burst in the fourth quarter of 1999, wiped out more than €110 billion in market capitalisation in 2000.

The Athens bourse is now capitalised at a reasonable €84 billion, around 60 per cent of the country's GDP. At its all-time peak, the stock market's capitalisation reached almost twice GDP, highlighting an asset bubble.

Greece found that as a small fish in a large liquidity pond, global fund managers could afford to live without it.

After shedding its emerging market tag in May last year to join developed market indices, the stock market's average daily trading volume thinned gradually to less than €100 million this year from €710 million in 1999.

Greece's weighting in index compiler Morgan Stanley Capital International's (MSCI) Europe benchmark is a tiny 0.52 per cent, 1.06 per cent of MSCI Euroland and 0.38 per cent of MSCI EAFE.

"Greece is now a mature market and criteria are the same for all markets in this category. Globalisation makes decoupling more difficult," said an experienced fund manager. When fund manager Intertrust launched the Olympic Winner mutual fund in the hey days of 1999, offering investors a way to bet on shares likely to benefit from the Olympic Games, it took in about €840 million in the first two months.

The fund's performance since then is a dismal -74 per cent, its assets down to €293 million currently.

Still, Olympic Winner's asset allocation - 44 per cent construction, 13 per cent metals, 12 per cent building materials - highlights where professionals think the action will be for investors betting on Olympics 2004 related out performance.

With European Union grants going mainly into infrastructure projects - roads, ports and rail - and low mortgage rates after euro membership driving housing demand, Greece's construction sector is also getting a boost from the Olympics.

"Greece looks set to have one of the strongest construction markets in Europe over the next two years," said Schroder Salomon Smith Barney analyst Lambros Papadopoulos, giving a thumbs up on Titan Cement.

The volatile construction sector stole the show this May with gains of 10.3 per cent, out performing the broader market. And building goes hand in hand with cement deliveries.

"Construction and cement production should grow by no less than 4.0 per cent in 2002 and 2003, due to a strong residential market, EU grants and the upcoming Olympics," Papadopoulos said.