ATHENS–Greece may have been labeled the basket case of Europe, but for some contrarian investors, it has offered heady returns in stocks and bonds this year.
The investor march into Greek markets is in anticipation that the country will secure additional debt relief from the euro-area countries — which holds 80 percent of the country's 326.5 billion euros ($365.7 billion) debt — after years of stringent austerity measures.
After seven years of tax and social reform that has slashed pensions, wages and social benefits, Greece has one of the best-run public finance performances in the euro zone. Last year the country had a budget surplus of 0.7 percent of GDP, almost as much as Germany. In 2009 the deficit was 15.6 percent of GDP.
Recognizing this trend, investors have poured money into the American-listed Global X MSCI Greece exchange-traded fund (GREK), an ETF that rises and falls with the overall economy of Greece. It is up more than 25.1 percent on a year-to-date basis, while total returns for a year period is up by about 31.8 percent.
"Many of the stocks inside GREK are undervalued, including Hellenic Telecomunications, the Greek Organisation of Football Prognostics, and Jumbo, a retail chain," says Todd Rosenbluth, director of ETF and mutual fund research at CFRA.
Now investors are eyeing Greece's bond market. It has been reported that Greece will roll out its first sovereign-debt issue in three years in July if its international lenders specify longer-term debt relief for the country, and the European Central Bank includes it in its bond-buying program.
Sources in Athens say they want to test the market appetite for Greek debt before a current bailout program worth up to 86 billion euros ($96.3 billion) expires in mid-2018. They are considering swapping a five-year bond which was issued in 2014, with a new five-year bond and raising an amount over the same issue. The 2014 five-year bond raised 3 billion euros. The yield on Greece's five-year bond, maturing in 2019 was 5.03 percent on Wednesday.