Scalper1 News
Investors have been worried over the debt negotiations between Greece and its creditors this year. This also had a negative impact on the major benchmarks. Recently, Greek Prime Minister Alexis Tsipras submitted fresh proposals before its creditors to settle the debt crisis. Meanwhile, Greece failed to repay a debt of around $338.7 million to the International Monetary Fund (IMF) and decided to bundle four June payments into one, to be paid on June 30. Separately, Tsipras is looking for support from his Syriza party on this matter. However, the situation is not in his favor at this moment. Several members wanted a re-election if Tsipras lets the creditors have their say. “Realistic” Proposals New proposals are reported to consist of concessions on stricter austerity targets. Reportedly, it includes a hike in the VAT (value added tax) rate, among other financing options that will buy Greece time to strike a deal next March. It was also reported that the finance minister Yanis Varoufakis came up with an idea to transfer the debt held by the European Central Bank (ECB) to the European Stability Mechanism, Eurozone’s crisis-fighting fund. After submitting these proposals, Tsipras said he believes that Greece will be able to strike an agreement regarding debt negotiations in the near future. Though it was reported that the creditors may consider extending the country’s bailout program till the end of March 2016, creditors sounded not so optimistic about the proposals. It was reported that the creditors, including IMF, may consider the extension if Athens implements measures including pension cuts, tax increases, and other policies. Will ‘Grexit’ Happen? It is speculated that nobody wants the nation to exit the common currency bloc and thus Greece is poised to play “the game for as long as they can.” Grexit may lead to instability in the currency union, which other members of the EU would like to avoid. In this scenario, the “Grexit” prospect seems unlikely. Meanwhile, German Chancellor Angela Merkel and French President François Hollande agreed to meet Greek Prime Minister Alexis Tsipras on the sidelines of a Brussels summit to defuse the standoff between Greece and its creditors over the country’s bailout program. Moreover, the European Central Bank increased the amount Greek banks can borrow from their central bank to $94.1 billion, the highest increase since Feb 18. Separately, the New York Times’ Paul Krugman pointed out that Greece has already done a large volume of adjustments, the cost of which is so huge that the country should have been in a better position if it had exited the euro in 2010. He noted: “You can make an even better case that Greece would have been much better off if it had never joined in the first place. But at this point these are sunk costs. If Greece can negotiate a halfway reasonable compromise, one that more or less pauses further austerity, it’s hard to see that the risks of exit would be worth it.” GREK in Focus Several investors are hoping that the country will reach a deal with its creditors soon. Wilbur Ross, who along with a group of investors, has $1.47 billion riding on Eurobank Ergasias, the third largest bank in Greece, remained optimistic about the situation. Regarding the investment environment in Greece, Ross said that the dismal situation might take a swift turn in the near future “if the brinkmanship on display between Athens and the creditors ends in a credible deal that restores the confidence of foreign investors.” In this scenario, the Greek ETF – Global X FTSE Greece 20 ETF (NYSEARCA: GREK ) – will remain on investors’ radar till a potential deal is struck between Greece and its creditors. The ETF tracks the FTSE/ATHEX Custom Capped Index that is designed to reflect the performance of the 20 largest securities listed on the Athens Stock Exchange. The product holds 22 stocks in the basket and is heavily concentrated in the top 5 holdings that make up for a combined 55.4% of assets. The ETF has around $308.8 million in its asset base and sees a moderate trading volume of more than 800,000. The fund charges 55 bps in annual fees from investors and has a dividend yield of 1.1%. GREK has a Zacks Rank #3 (Hold) with a High risk outlook. The fund lost? 10.3% in the year-to-date frame and declined nearly 1% in the trailing one month. Original Post Scalper1 News
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