In June 2012, we suggested that investors with a strong stomach might want to invest in the Greek stock market using the Lyxor ETF FTSE Athex 20 (Paris: GRE) to take advantage of the rock-bottom valuations, in the hope that the crisis would be resolved one way or the other.
Despite the can kicking' from both sides, it was extremely successful during that period, surging 140% from €0.89 when we first tipped it, to a peak of €2.14 in March 2014. However, the turmoil of the last 15 months has caused it to plunge, falling to the current level of €1.15, as of Friday's close, though this is still nearly a 30% return over that period.
The ETF has now been suspended due to closure of the Greek stockmarket until at least after Sunday's vote. However, the major American Greek ETF Global X FTSE Greece 20 ETF (NYSE: GREK) is still trading. At the moment, it is down around 15% from its weekend levels, whichgives someindication of how the Lyxor ETF would be doing if it was still trading.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
So, when the smoke clears, should you rush to sell?
We'd suggest not. We suspect that in the longer run, the Greek stockmarket will be worth more than it is today, regardless of the currency it's denominated in. As we've said many times before, there are two realistic solutions: Greece leaving the euro and/or the Troika writing down most of Greece's debt and relaxing its demands for spending cuts.
While we'd prefer the first option (and think Athens should have left a long time ago), even the second option will enable Greece to turn itself around. In any case, with the Greek market trading at a cyclically-adjusted price/earnings ratio of around three, compared with America's level of 26, any downside is already priced into the market.
-
FTSE 100 hits record highs – why is it rising and will we see more gains?Advice UK equities have been described as unloved for a long time but as the FTSE 100 hits new highs, we explain if now is the time to buy British.
-
How to invest in copperIt may be time to invest in copper as the red metal appears poised for a big jump. Dominic Frisby looks at what should investors should buy
