Greece should be about to get a credit upgrade to investment
grade from non-investment grade and the markets seem ill prepared for this
positive development.
Greek stock and bond markets have been on a negative
trajectory since the sovereign financial crisis of 2008/ 2009. After such a long negative stretch, positive
investors seem to be a rarity. The investment landscape is filled with short
sellers and traders who have been attacking the markets on every negative
headline. With a lack of positive investors,
the markets positive moves have been limited. Greece has made substantial
progress in moving its economy forward with the required adjustments of its
creditors. As a benchmark of the limited
positive progress in the Greek markets, the main Greek stock market index, the
ASE, is down 85% from its peak in 2007. Yet
the outlook for the Greek economy is positively poised with a long term upward
trajectory. This leaves the market susceptible to positive asymmetric skews to
its return profile.
Greece has now overcome its financial difficulties and
passed all the laws necessary to complete its financial assistance from the
international community. This Thursday there
is a Eurozone finance ministers and Greek creditor meeting that will discuss
and most likely agree on a path forward that allows Greece to tap the public
debt markets, become self-sufficient in its funding and have its bonds accepted
as collateral for the ECB’s sovereign debt quantitative easing purchases. Once
this happens, Greece’s credit rating should soon follow to investment grade.
This will force and allow investors to access Greece’s markets again after a
protracted period of being non-investment grade and off limits.
When markets are depressed for such a protracted period and
the economic climate improving but not acknowledged in financial markets, the
potential for significant upside exists. If Thursday’s meeting continues to
show progress, investors will eventually catch on. It should not take heavy inflows into the
markets to propel assets higher since the base is so low and investors so few. Therefore, there should be a great focus on
Thursday and any positive developments should be felt instantly in the
marketplace. But it appears that the markets are prepared for no positive
developments. This discounts all of the
positive steps taken so far. It ignores
that Greece has been set on a healthy path to prosperity and all necessary developments
will be forthcoming, whether today, tomorrow or down the road. It’s time to stop being hyper-focused on the
negatives and acknowledge the substantial positives in Greece.
by Michael Carino, 6/12/17
Michael Carino is the CEO of Greenwich Endeavors, a
financial service firm, and has been a fund manager and owner for more than 20
years. He is optimistically invested in
Greek equities.