Despite lingering concerns over a third bailout plan, Greek markets and country-specific exchange traded fund surged Friday, with banks leading the charge, on speculation that lenders will capitalize on the European Central Bank’s updated quantitative easing program.
The Global X FTSE Greece 20 ETF (NYSEArca: GREK) increased 5.6% Friday. Nevertheless, GREK was still down 9.8% year-to-date.
Greek banks advanced the most among European equities Friday after a European Central Bank spokesman stated that Greek issued European Financial Stability Facility bonds will bee eligible for purchase under the central bank’s QE plan, reports Camila Russo for Bloomberg. Greek banks were previously prohibited from selling the notes.
“This is good because Greek banks need to take big provisions for non-performing loans and an extra source of profitability could be very helpful for the overall results for the year,” Nikos Kyriazis, an equity sales trader at NBG Securities, told Bloomberg.
Greek banks hold about 37 billion euros, or $41.7 billion, EFSF notes, reports George Georgiopoulos for Reuters.
“Up to 50 percent of the outstanding amount can be purchased as this is the limit applicable to securities issued by eligible international organizations,” the ECB spokesperson told Reuters.
The FTSE/Athex Banks Index jumped 16% Friday, the most since February, with Eurobank Egrasias SA 20% higher and Alpha Bank AE up 13%.[related_stories]
Financials at 32.9% make up the largest sector weight of GREK’s underlying portfolio. GREK also includes a 14.0% position in Alpha Bank and 5.1% in Eurobank Ergasias SA.
Greek markets remain depressed as the country tries to secure a third bailout deal, initially due by December, reports Deborah Hyde for Bloomberg. The talks could contribute to increased volatility ahead.
RBS analysts argue that a “Brexit” vote, weaker regional growth and political uncertainty could cause voters to focus on other risks like Greece if debt spreads come under stress again.
Citigroup also warned of potential higher bond spreads among peripherals in the coming months, which could trigger another so-called debt crisis in Greece.
Global X FTSE Greece 20 ETF