Greece will hold elections Sunday. Many market observers
believe the battle between radical leftist Alexis Tsipras and New
Democracy leader Antonis Samaras could decide the country's
future relationship with the Eurozone.
Widely viewed as the first country to potentially depart the
17-nation common currency scheme, Greece and its fiscal woes have
been roiling global markets for nearly two years. Tsipras opposes
the terms of bailout plans, but has said he wants his country to
remain in the Eurozone. His opponent Samaras, who supports the
bailout, has said he would like to renegotiate terms of a loan
deal in an effort to inflict less pain on the Greek populace.
No matter the outcome, a Greek departure from the common
currency and subsequent return to the drachma would have dire
consequences. Greek banks are already seeing up to $1 billion per
day in withdrawals, and could be crushed by a drachma return.
) said last month
new drachma would immediately lose 60% of its value
To say this election is important is an understatement.
Traders can prepare for the outcomes with the following ETFs:
Global X FTSE Greece 20 ETF (NYSE:
An obvious play, but it is worth noting that thinly traded GREK
saw its volume explode on Thursday. Speculation was rampant that
global central banks were preparing plans to inject liquidity
into the international financial system following the Greek
elections. That rumor sent GREK up 12.5% on better than quadruple
the fund's average daily volume.
Financials account for a third of GREK's allocation, which
amplifies the impact Sunday's election could have on this ETF.
GREK has gained almost 19% in the past five trading days and that
rapid gain could underscore the ETF's vulnerability on the
downside. On Thursday, it took less than 64,000 shares to move
this ETF up almost 13%. In other words, it wouldn't take many
sell orders to send GREK to a double-digit loss after the
Vanguard MSCI Europe ETF (NYSE:
The Vanguard MSCI Europe ETF is not heavy on Greek equities, but
it is one of the premier Europe ETFs. Despite the fact that VGK
is home to plenty of blue-chip names, the Europe label has
plagued this fund, which has lost almost 22% in the past
VGK recently found support near $38, but the fund faces what
could prove to be stiff overhead resistance around $42. If things
do not go well in Greece on Sunday, resistance will not be a
problem for VGK. Those looking to hedge a long-term position in
VGK or make an outright bet against the fund should consider the
ProShares UltraShort MSCI Europe (NYSE:
Guggenheim Shipping ETF (NYSE:
In 2011, Greece's economy was the 34th-largest in the world,
according to the CIA World Factbook. That is just small enough to
ensure the country does not receive a lot of large allocations
among ETFs offering international exposure.
The Guggenheim Shipping ETF, a
a fund that is sensitive to macroeconomic
, features a 10.5% weight to Greece. That makes SEA the ETF with
the second-largest Greece exposure after GREK. Stormy seas could
await this fund come Monday.
iShares MSCI Spain Index Fund (NYSE:
EWP has jumped almost 4.5% in the past week, but the only way
this downtrodden fund keeps that momentum going is for global
markets to be truly satisfied with the Greek election results. If
that does not happen and Greece stamps its ticket out of the
Eurozone, traders' attention will shift to Spain on speculation
that the country will follow Greece out the door.
Spain's bond yields remain elevated and the country is
teetering on the brink of a move to non-investment grade status.
That means EWP is not to be trusted as anything more than a
PowerShares DB Italian Treasury Bond Futures ETN (NYSE:
ITLY and its leveraged cousin, the PowerShares DB 3x Italian
Treasury Bond Futures ETN (NYSE:
), are direct
plays on Italy's problems
, but the order of the European dominoes appears to be Greece,
Spain then Italy. Bottom line: If Greece heads out of the Euro
Zone, investors are not going to be putting cash to work with
iShares Gold Trust (NYSE:
For much of 2012, gold has behaved like a risk asset, not a safe
haven. The yellow metal's risk status has been changing for the
better over the past month. The CurrencyShares Euro Trust (NYSE:
) is down 1.7% since May 15, but IAU is up 4.3%.
Those looking to make a bet against moving to the upside
post-Greece elections should consider the PowerShares DB Gold
Double Short ETN (NYSE:
) or the PowerShares DB Dollar Bullish (NYSE:
) as a more conservative option.
For more on European ETFs, click
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