The Global X MSCI Greece ETF (NYSEArca: GREK) was one of 2019’s best-performing single-country ETFs and with the Greek economy on increasingly sound footing, GREK could be poised for another solid showing in 2020.
GREK seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI All Greece Select 25/50 Index. The underlying index is designed to represent the performance of the broad Greek equity universe.
The Greek economy, classified as an emerging market, has consistently been improving over the past couple of years and the country recently, to the surprise of some market observers, issued negative-yielding debt, meaning investors are paying for the privilege of owning those sovereign bonds. Importantly, signs continue emerging that Greek banks are firming.
“The Greek government, which took office in July, has already voted a package of measures that include reductions in taxes for companies and households. It also aims to renegotiate its primary surplus targets for 2021 and 2022 with European creditors — a discussion expected to start in the first half of this year,” reports Bloomberg.
Getting With The GREK
Looking ahead, the new government is less likely to undo some structural reforms that have been undertaken in the past. Furthermore, the risk of higher labor costs, less labor market flexibility and erosion of wage competitiveness would decline under a New Democracy-led government.
Additionally, Greece is taking steps to bolster the domestic economy via increased tourism, including long-awaited plans for a new casino. GREK is positioned to benefit from some other macro themes.
“Global growth in advanced economies is projected at a modest 1.7%, while expectations for manufacturing and capex in places like the US and Europe remain muted,” according to Global X research. “Contrast this with emerging markets, which are cheaper yet expected to grow broadly at 4.6%-4.7%, driven by long term structural tailwinds, like rising consumerism and technological adoption.”
GREK is intimately tied to a cyclical-led recovery in Greece because the fund allocates over 63% of its weight to banks, energy stocks and consumer discretionary names. The combined 46% weight to banks and consumer cyclical stocks benefits GREK as Greek consumers’ health improves.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.