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Euro and Greek Drachma coins are displayed on euro banknotes in this picture illustration taken in Istanbul June 14, 2012. (Murad Sezer/REUTERS)
Euro and Greek Drachma coins are displayed on euro banknotes in this picture illustration taken in Istanbul June 14, 2012. (Murad Sezer/REUTERS)

Funds

Watch Greek ETF for political impact on markets Add to ...

Results of the Greek election on Sunday in support of a pro-Euro, pro-austerity agenda are final, but impact on equity markets is far from final. As Wednesday’s deadline for a coalition decision approaches, political events could have a significant impact on Greek equity prices and potentially on world equity markets. Most North-American investors don’t have direct access to Greek markets, but there is an  Exchange Traded Fund  that can help with that problem. Tracking the Global X Greece ETF (GREK-N), which holds a diversified basket of large cap Greek equities, is a one-stop solution that could give a short-term clue as to the direction of events as they unfold.

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Investors can monitor investor sentiment on Greek equity markets simply by watching this ETF’s performance. The ETF was launched last December and has attracted increasing investor attention. This is the only Greek ETF that trades on North American exchanges, and is the only direct way to monitor the Greek equity market.

Click to view the Global X Greek ETF six-month chart.

Volume in the ETF reached record levels last week. The fund holds 20 big cap Greek stocks. Top five holdings by weight are Coca Cola Hellenic, National Bank of Greece, OPAP SA, Titan Cement and Hellenic Telecom. Management Expense Ratio is 0.71 percent.

On the charts, the ETF has been on a rollercoaster ride. It lost more than half of its value from a high at the beginning of February at $19.53 to its low on June 5 at $8.78. However, the ETF picked up from its low and advanced 35.8 per cent to its closing high on Friday at $11.92 in anticipation of a pro-Euro, pro-austerity win.

Initial equity market reactions to results of the Greek election were positive. S&P 500 futures quickly gained 9 points on Sunday night after results were announced. The Euro, European and Asian equity indices also recorded gains. However, favourable responses quickly evaporated on Monday when prospects for forming a coalition government became less certain. The prices of Greek equities and the ETF responded by moving lower.

What happens next? Formation of a coalition is expected to have a positive impact on Greek equity prices. However, failure to form a coalition or significant changes to financial terms proposed by the euro zone are expected to have a negative impact on Greek equity prices. This is a highly volatile ETF, which can be best used to get a feel for the market before official announcements come out. Stay tuned by watching price action of the Global X Greece 20.

Don Vialoux is the author of free daily reports on equity markets, sectors, commodities and Exchange Traded Funds. He is also a research analyst at Horizons Investment Management, offering research on Horizons Seasonal Rotation ETF (HAC-T). All of the views expressed herein are his personal views although they may be reflected in positions or transactions in the various client portfolios managed by Horizons Investment. Horizons Investment is the investment manager for the Horizons family of ETFs. Daily reports are available at http://www.timingthemarket.ca/

Follow on Twitter: @EquityClock

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