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.
Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
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