Achilles Risvas’s hedge fund Dromeus Capital is among the few that have made “handsome profits” with Greek bonds, says Iain Dey in The Sunday Times. It bet that the eurozone was committed to keeping Greece in the single currency, and cashed in as this became increasingly clear. Now it reckons some stocks are worth a look.
The risk of a chaotic exit has shrunk greatly, while the market is extremely cheap: in the average eurozone country, the stockmarket is worth 40% of GDP; in Greece, 16%. The economic slump has caused misery, but Greece has “managed to improve competitiveness”. Austerity has eliminated the current account deficit and lowered labour costs significantly: salaries have declined by an average of 16% since last year.
But it’s a risky trade. The trouble is that austerity has also undermined the economy, creating a downward spiral of mounting debt and yet more austerity. Another debt write-off is certain. With the global economy shaky, making export growth difficult, domestic reforms to boost productivity, such as privatisations, could help. But there has been scant progress on this front.
So it’s hard to see improved competitiveness leading to, or being complemented by, growth any time soon. With unemployment already at 26%, says Dey, “the country could tear itself apart”, leading to a chaotic exit from the euro, before any recovery kicks in. If you’re feeling bold, you could buy the Lyxor ETF FTSE Athex 20 (Paris: GRE) – but be aware that it’s a high-risk punt.