Greek ETF Surges 5.5%; Is This Recovery For Real?

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Global X FTSE Greece 20ETF ( GREK ) -- the only U.S.-traded ETF tracking the Mediterranean country -- soared 5.47% Wednesday to 19.49, an 11-week high.

The gain came after a five-day holiday stock market break in observance of Easter and May Day.

National Bank of Greece ( NBG ), weighted 7% in the ETF, led gains in the portfolio. It vaulted 18% to 1.19 in more-than-double average volume.

Low-priced stocks, however, are very volatile especially when they trade deeply below their 200-day moving average as NBG does. NBG shares have cratered 98% from their 2007 high and traded as low as 61 cents a share in April.

Shareholders of Greece's largest lender approved in late April a recapitalization plan to allow it to remain privately run.

"We've had a rebound in the banks in Greece because the worst was priced in," Wojtek Zarzycki, chief investment officer at Optimal Investing, based in Toronto with $150 million in assets under management, said in an email. "Now that we've bounced back, we should see more selling when bad news hits the wires."

Morgan Stanley strategists are recommending investors buy Greek government bonds. They believe they offer an attractive risk-to-reward given that their prices dropped 20% from their January high. Yields on benchmark 10-year bonds fell below 10% this month as fears over the Europe's debt crisis eased. Greek 10-year yields soared to 30% last year before the country's debt restructuring.

"It is one of only a few fixed-income instruments that offer double-digit total return... in the current yield-strapped environment," Morgan Stanley's economists and credit strategists wrote in a client note April 4. They also believe bond prices will rise in a second restructuring.

Greece's economy will contract 4% this year after shrinking 6.4% last year, Morgan Stanley forecasts. They see no economic growth in 2014 but are more bullish than most analysts.

"A recovery hasn't started yet, but data are becoming less bad, as the shocks that hit the Greek economy -- including euro exit worries -- are starting to dissipate, and bank deposit flows now look fully stabilized," they wrote.

Global X FTSE Greece 20 ETF most heavily weights consumer staples at nearly 25% of assets. That's followed by consumer discretionary 20%, financials 15%, telecom 10%, energy 10%, basic materials 8%, utilities 5%, industrials 4%, aluminum 4% and transportation 1%.

GREK gained 7.92% year to date whileiShares MSCI EAFE Index Fund ( EFA ), tracking foreign developed markets, climbed 11.19%. But in the past 12 months, GREK rallied 37.25% vs. 20.96% for EFA.

GREK appears to be forming a bullish cup-without-handle chart pattern with a potential buying point at 20.41. It trades above both its 50- and 200-day moving averages, indicating a strong uptrend.

It carries an IBD Relative Strength Rating of 84 on a scale of 1 to 99. That shows its price performance has outpaced 84% of the market in the past 12 months. Its B- IBD Accumulation/Distribution Rating shows institutional investors are heavily buying more shares than selling. This goes to show the stock market looks ahead and bull markets climb a "wall of worry." GREK may be pricing in an economic recovery that's yet to be seen in the fundamentals.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , ETFs

Referenced Stocks: EFA , GREK , NBG

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