The past weekend was a huge one for European markets as a number
of key elections took place. In France, Francois Hollande edged out
incumbent Nicolas Sarkozy to push the country further left along
the political spectrum, while Greece experienced a more uncertain
result in its parliamentary vote.
The troubled country rejected many of the main parties as
citizens took to far right and far left groups this time around.
This shift to the extremes was seen as a sweeping rejection of
those who led the country into austerity programs as Greece has
failed to recover from the massive budget cuts and remains mired in
a low growth, high unemployment environment (read
Pain In The Spain ETF Continues
This rejection of the mainstream had a very negative impact on
the country's stock markets as many are forecasting that a
coalition government will not be able to form and that another
election may have to be held in two months time. Given the stakes
in Europe and the growing fear of a possible exit from the euro
zone by Greece, this uncertainty wasn't welcomed news for stocks to
say the least.
"Financial markets loath uncertainty, and so the reaction seen
to the elections makes a great deal of sense,"
said David White
, a trader at Spreadex.
As a result, the main way to play the Greek economy in ETF form,
Global X FTSE Greece 20 ETF (
, was down as much as 10% in early Monday trading but was in the
red by about 7.7% at time of writing. This also came on outsized
volume for the product as trading reached the daily average by
about 11 am Eastern time.
The product is now down about 8% so far this year, marking a
huge reversal for the once surging fund. In fact, GREK was up about
30% in the first month of the year representing an incredible run
for the beaten down market. Obviously, this surge wasn't meant to
last as the product promptly fell back to earth over the next two
months, pushing it close to its lows since the ETF launched in
Global X Debuts Greece ETF
Given the extremely negative reaction by the markets to this
election, it will be interesting to see what happens next in the
Greece ETF. It seems highly unlikely that parties so far apart on
the political spectrum will be able to agree on enough to form a
coalition, implying that another round of votes could be likely in
the near future.
Yet, even if another vote is needed, it seems doubtful that the
main parties will be able to recoup that much of their losses. The
sentiment against austerity is too strong and a return to this
philosophy probably won't be the result of any vote in the nation
(see more on ETFs at the
Thanks to this, political risk could be a huge problem going
forward in Greece, especially if it appears as though the troubled
country may be without a coalition government for some time. If
this dreaded scenario takes place, look for not only GREK to
falter, but for other ETFs representing larger European
nations-which have a lot to lose as well-plunge as a result of this
heightened risk and continued uncertainty in the health of the
common currency bloc.
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