The Global X FTSE Greece 20 ETF (NYSEArca:GREK) has had an
interesting ride so far this year, but no move has been more
noteworthy than the latest rally that has pushed GREK up more than
30 percent in the past month alone, while the fund's assets under
management more than tripled in size.
The fund, which now has almost $20 million in assets, has been
atop IndexUniverse's daily returns tables for the past two
The timing of the move seems counterintuitive amid a persistent
undercurrent of views that Greece is more likely to exit the euro
than it is to remain a member of the European currency block. A
departure from the euro would most likely translate into a dramatic
currency devaluation that, in the short term, would hurt U.S.
investments such as GREK.
Many analysts are making the case that all the recent European
Central Bank rhetoric and stimulus measures-such as bond buying
plans-have done more to ensure an organized and controlled Greek
exit from the bloc than prolong its member status.
In a recent report picked up by various news outlets, Citigroup
Chief Economist Willem Buiter said a Greek departure from the
eurozone is now a near certainty, and it could happen in the next
12 to 18 months, perhaps even as soon as Jan. 1, 2013.
"Fiscal trends remain weak, with revenues and privatization
proceeds markedly undershooting official forecasts, while the
election earlier this year has not significantly improved Greece's
ability to get the programme back on track," Citi's report said,
suggesting an exit might be inevitable.
But according to Buiter and his team of analysts, the latest ECB
action alleviated tail risk, helping ensure that a "Grexit"
wouldn't shake up the whole region. So with a "firewall" in place,
the stage is set for a Grexit and, most importantly, Spain and
Italy are likely to remain stable should such an eventuality come
Nevertheless, it's anyone's guess whether Greece will stay or
go, and the timing of a decision, one way or the other, is just as
That uncertainty could be one of the factors driving GREK's
stellar performance in recent weeks, Global X Funds Research
Analyst Alex Ashby told IndexUniverse.
If Greece does not leave the euro, it now can rely on what
appears to be increasingly "accommodating" ECB and other member
countries' support to implement the structural changes it needs to,
"Some people see an exit as happening, and others don't," Ashby
said. "It's hard to say what investors are thinking, but either
way, it's important to make a distinction between a disorderly exit
and a reduction of the uncertainties surrounding the process."
The headlines coming out of the ECB-the market is sensing more
leniency in Germany-collectively suggest that the Greek government
might have more time to qualify for additional aid, he added.
"There is a widespread belief that an exit might not happen, or
at least not happen until much farther down the road," Ashby
For those investors, Greek equities-or GREK for that
matter-strike them as a solid value play on an economy they expect
will implement key structural changes to help put its market back
on the growth track, he said.
The only certainty investors can bet on as far as exposure to
Greek equities right now is on high volatility. Trading ranges for
GREK have been "pretty wide" and should remain so until the market
has more clarity on Greece's future.
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