Shares of the Global X FTSE Greece 20 ETF (NYSEArca: GREK) climbed nearly 2.5% Friday on volume that was slightly above average after Standard & Poor’s raised its ratings on Greek debt, a move that helped bolster shares of the country’s banks. Financial services is one of GREK’s largest sector weights.
GREK tumbled nearly 40% last year, making the lone Greece exchange traded fund the worst-performing single-country ETF tracking a PIIGS economy, but that did not stop investors from piling into the fund.
“S&P raised its long-term foreign and local currency sovereign credit ratings on the Hellenic Republic to B- from CCC+ on Friday, and raised the short-term foreign and local currency sovereign credit ratings to B from C. Real GDP in Greece is expected to decline 1.3% in 2016, putting it in a league with Brazil (-3.5%) and Russia (flat), according to Bank of America/Merrill Lynch estimates,” reports Dimitra DeFotis for Barron’s.
The IMF projects that Greek debt will hit 200% of GDP in two years, which could “only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far.” It is also widely expected that GDP there will contract again in 2016.
The Greek economy has already contracted 25% in the past five-years as the government tackled with austerity measures designed to diminish the growing public debt.
News of the S&P upgrade for Greece comes just days after market observers expressed concern about the health of Italian banks.
“The Italian banking index is down 18% this year, and Italy’s third-largest and most historically troubled bank, Monte dei Paschi, has lost 50% of its value during the same period. The most dramatic drops have taken place this week. The Italian stock market regulator has deemed it necessary to ban short selling on Monte dei Paschi stock in an attempt to prevent speculators from benefiting by driving it lower, yet it continues to fall,” reports MarketWatch.
Last year, reforms to Italy’s banking sector were seen as a potential driver of improved equity market performance. Specifically, the reforms would turn these types of banks into possible takeover targets almost instantly. For instance, the new rules could be a catalyst for a potential merger between UBI Banca and Banca Monte dei Paschi di Siena. [Catalysts for the Italy ETF]
Global X FTSE Greece 20 ETF
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