The Global X FTSE Greece 20 ETF (NYSEArca: GREK) lost almost 2.7% Monday after the Athens Stock Exchange reopened following a five-week hiatus. That performance almost looks good compared to the 16% lost by stocks in Athens and the 30% lost by a widely followed index of Greek banks.
GREK, the lone Greece ETF, has lost nearly a quarter of its value since Greece closed suspended trading and closed its banks on June 29 to limit a run on assets after talks with creditors broke off.
Exchange traded funds try to reflect the performance of an underlying market. However, there are times when an ETF may diverge from the net asset value, especially with international markets. While the Greek bourse was closed, U.S.-listed GREK traded at double-digit percentage discounts to its net asset value, reflecting investor’s concern with Greece-related assets on the New York Stock Exchange. [While Athens Exchange is Closed, the Greece ETF Show Goes On]
While it might be seen as a step in the right direction that the Athens bourse is open again, it might be a while before traders expect to see it in the green. In fact some traders in Europe said Monday the day’s declines for Athens-listed shares could have been much worse if not for various restrictions put in place to limit big declines.
“Under rules announced last week, stocks exhibiting extreme volatility were halted sooner than normal, while would-be buyers had to raise money from places other than their bank accounts due to capital controls implemented last month,” according to Bloomberg.
For five weeks, GREK had been the lone price discovery mechanism for Greek stocks. With the Greek exchange back online, normal arbitrage activity resumed in the Greece ETF. GREK now shows a slight 0.6% discount to its NAV. GREK has also been dragged down by its large tilt toward the weakened financial sector.
However, the Monday decline in Greece also reflected a surge in panic selling as limits on withdrawals, a crippled economy and an uncertain climate weigh on the market. [Betting on Greece ETF Recovery? Better Be Patient.]
Just 60 companies trade on the Athens Stock Exchange and 11 posted Monday declines of at least 29%, according to Bloomberg. Surprisingly, volume in GREK was below average Monday and the ETF remains more than 3% above its 52-week low set in late June.
Global X FTSE Greece 20 ETF
