Greek stocks are beating almost every market in the world as a six-year recession eases and new investors consider cheap purchases with good returns if the economy turns to health.
Once shunned by investors concerned that a default would force the nation out of the euro, the country’s ASE Index (ASE) has surged 146 per cent, trimming the decline from its 2007 peak to 79 per cent.
Paulson & Co. and JPMorgan Chase & Co. have bought shares as emerging-market funds including Renaissance Capital Holdings Ltd. and Templeton Emerging Markets Group expressed interest.
“I find very, very good opportunities, very well-run companies and very cheap valuations,” JPMorgan’s Francesco Conte said to Bloomberg.
“Greece is only just emerging from the crisis. Because they’ve cut their cost bases so low, the profitability growth is going to be enormous if we get positive GDP growth.”
Flows into equity funds investing in Greece rose 129 per cent from the beginning of the year through October 28, compared with a 15 per cent gain for Europe as a whole, data from EPFR Global Inc. show. Investors have poured $179 million into Greek stocks this year, according to the data.
MSCI confirmed it would switch Greece to an emerging market in June this year, having classified it as developed since 2001.
As an emerging market, Greece will be grouped with Europe’s other developing economies, such as the Czech Republic and Hungary. MSCI already classifies euro-area members Estonia and Slovenia as emerging.
The reclassification may allow Greek stocks that couldn’t meet the size or liquidity requirements to join MSCI’s measure for developed equities and benefit from inclusion in the MSCI universe.
Fairfax Financial Holdings Ltd., a conglomerate with investments from Canadian cattle feed to Irish banks, bought shares in two Greek companies this year.
“We continue to support Greece,” Fairfax Chief Executive Officer Prem Watsa said in the statement. “The country continues to make great strides towards addressing the key areas of its economy, thus encouraging foreign investment and creating a positive momentum that will foster increased employment and infrastructure development.”
The nation faces political disputes that may derail its recovery, with debt forecast to peak at 176 per cent of GDP this year.
The Greek recession has destroyed almost a quarter of its economic output and sent unemployment surging to a record 27.6 per cent. The ASE lost 91 per cent from October 2007 through the 22-year low reached in June 2012.
Source: Bloomberg Businessweek