Ultimate contrarian trade (Part 2)


Greek regulators are finally taking steps to reopen the Athens stock exchange.  After a month of closure, it will be interesting to see how volatile the market will be during the first few days of trading.  Will investors run for the exit or has prospects of a European bailout managed to calmed nerves?

This is a chart of the Athens Stock Exchange index from 1 Jan 2007 to 26 Jun 2015 (last day of trading before closure).  Over this period, the index hit a high on 5334 points in Oct 2007 and fell to a low of 476 points in Jun 2012.  This drop represents a fall of 91%, greater than the fall experienced in the Great Depression.  The index value as at 26 Jun 2015 was 797 points, whilst 60% up from the lows in Jun 2012, it is still 85% below the highs reached in Oct 2007.











A good way for foreign investors to get exposure to the Athens Stock Exchange is by investing in an ETF listed on the New York Stock Exchange called Grek (The Global X FTSE Greece 20 ETF).  This ETF is designed to reflect the performance of the twenty largest securities listed on the Athens Stock Exchange.  The top 10 holdings are as follows:



This ETF has continued to trade throughout the Athens Stock Exchange closure period and its currently trading at $9.75 whilst its net asset value (NAV) of $9.95.  This NAV is however dated, as it is based on stock prices which are a month old (with the exception of the fund’s largest holding Coca-Cola HBC AG which is dual listed in Greece and London).  It appears that the ETF investors are currently not pricing in much movement in NAV once trading re-starts on the Athens Stock Exchange.

Yes, the immediate crisis will be averted by the €86 billion bailout but with this third round of bailout and with even more austerity measures, haven’t we seen the ending to this movie? Einstein once said that the definition of insanity is doing the same thing over and over again and expecting a different result.  It will be interesting to see how investors react to this “insanity” once the market re-opens.

PS: I’m pleased that I’ve wrote about a security which is relevant to visitors from the US … 

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