Greece... recent memory brings only thoughts of severe
depression, massive fiscal fraud and spiraling debt loads. Throw
in an IMF bailout that nearly failed (twice) and a political
system keen on electing neo-Nazis and the equation does not
necessarily lead to a rosy economic outcome.
Forget everything that has happened in the past in Greece and
look at what the new government has done in less than a year
since taking office. Deposits are flowing back to Greece, bond
yields are falling, and the economy may be bottoming out. In no
way is it arguable that Greece will grow five percent next year;
however, investing is about finding undervalued assets that the
market has for some reason priced lower and finding catalysts for
their appreciation. A bottom in the economy after a 6-year
depression is one heck of a catalyst.
Look at some of the recent data. Greek bank deposits rose by
almost five billion euros, or almost 3.2 percent, in December and
January to just over 155 billion euros. This is still well below
the peak level of over 380 billion euros seen in 2008, but it
could be the mark of a bottom.
Greek 10-year bond yields, a good benchmark of the market's
view of the solvency of Greece, paint an even rosier picture.
10-year benchmark borrowing costs are a third of what they were
in May at 10.64 percent and have hovered just above the
10-percent level since the beginning of the new year.
2-year borrowing costs, a good measure of the market's view of
Greece's liquidity position, have fallen over the same period but
still remain at a whopping 225 percent. Effectively, Greece is
still viewed as illiquid by markets (meaning that it cannot
borrow anymore money right now), but it is not viewed as
insolvent (it should be able to repay its outstanding debts).
GDP data released for the fourth quarter on Monday, March 11
also paints an improving picture of the Greek economy. Remember,
Greece is in an outright depression and numbers will still
reflect that, however the rate of change of the data and the
direction of this change are what are important. Greece's economy
contracted 5.7 percent in the fourth quarter compared to the same
period a year ago, better than the 6.0 percent rate of
contraction seen a year ago and trumping economist estimates of a
6.0 percent annualized contraction.
The lessening of the rate of contraction in Greece is the best
GDP data since the third quarter of 2011, or seven quarters, and
second-best since the onset of Greece's debt crisis in 2010. This
could be another fake out or it could be the real deal.
One other factor to weigh in a Greek investment thesis would
have to be the bailout, specifically the government's ability or
reticence to adhere to the bailout conditions. Under the previous
government of Prime Minister George Papendreou, Greece tended to
miss targets creating tensions with its new creditors under the
program. This led to the massive stand-offs between the two
parties in negotiating new loan agreements.
Under the new government of Antonis Samaras, Greece has
actually met or beaten bailout targets and has successfully
cooled tensions with its creditors. Should Greece remain on track
with its program, this would not only be a boost for investor
confidence in Greece but it could also signal a new-found
political stability in Greece for which investors have clamored
for years. The parliamentary coalition of centrist governments
from the right and left, led by Samaras and former Finance
Minister Evangelos Venizelos, that are both pro-growth have
successfully kept the radical Syriza from voicing its anti-EU
opinions in votes.
All in all, Greece may be looking more attractive than at any
point in the past dozen months or so. However, there are still
many risks to any investment in a nation still trapped in a
depression that has run longer than a half-decade that is still
on the life-support systems of its Troika of creditors.
Nevertheless, any improvement is a change in the direction of the
data, a change (hopefully) for the better.
Investors looking to invest in Greece from the U.S. without
access to the Greek stock market have few options to invest, but
still can invest in diversified portfolios. With an average daily
volume of just under 40,000 shares over the past three months,
investors could look to the rather illiquid Global X Funds FTSE
Greece 20 ETF (NYSE:
) to create a portfolio. This portfolio is overweight to
economically sensitive sectors such as financials and consumer
stocks which could do well in an economic rebound.
There are also three Greek companies with ADR's traded in the
U.S. Coca-Cola Hellenic Bottling Co. (NYSE:
) is the Greek bottler for Coca-Cola (NYSE:
). The stock was trading a bit more than 4 percent off of its
52-week high and just bounced off of support at its 20-day moving
average as of Friday, March 8's close.
Tsakos Energy Navigation (NYSE:
) also has shares traded in New York. However, the Greek oil
transportation company has had to deal with the double blow of a
slowing domestic economy and declining global shipping rates
Lastly, the National Bank of Greece (NYSE:
) is traded in New York and may be the most popular of all of the
Greek ADR's as it is a pure play on the financial health of the
Greek economy. Along wit the Coca-Cola Hellenic Bottling Co., it
is of the largest holdings of the GREK ETF. The bank could be a
great way to invest in a recovery in the financial health of
Greece, a fall in unemployment, and a rise (or at least a bottom)
in consumer credit.
All in all, investing in Greece is extremely risky and should
be done with extreme care. However, recently, the new risks have
been dwarfed by the new positives in the country and this in
itself is a positive. No longer are investors chatting about
another haircut, the next bailout, or Greece leaving the euro.
Greece is now simply an afterthought of investors when they think
about the European debt crisis. It is for these reasons why
sentiment may slowly be ebbing from negative to positive... but
just about as slow as molasses.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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