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.
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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.
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