Is GREK about to lose its biggest holding, Coca-Cola Hellenic?
Global X Funds, the New York-based fund provider known for its niche strategies, has finally spoken up about the likelihood that its Global X FTSE Greece 20 ETF (NYSEArca: GREK)—the market’s only Greece-focused ETF—might have to shed its largest holding.
Back in October, Coca-Cola Hellenic said it was looking to move its headquarters to Switzerland, and to move its primary listing from the Athens Stock Exchange to the London Stock Exchange. The connection is that the world’s second-largest Coca-Cola bottler is GREK’s largest holding, representing about 17 percent of the portfolio.
GREK, which tracks the FTSE/ATHEX 20 Capped Index, invests in the 20-largest Athens-listed names, meaning Coke Hellenic’s departure from the Athens bourse would make it ineligible for the fund. Until now, Global X had said little on the matter other than to reassure investors that no changes would take place in GREK's portfolio until FTSE made a move.
But in a supplement to the fund’s prospectus submitted to regulators, the ETF provider acknowledged that Coke Hellenic’s decision might cause GREK to either “reduce or eliminate its holdings in Coca-Cola Hellenic.”
“The completion of these transactions may result in Coca-Cola Hellenic no longer meeting the index provider’s criteria for inclusion in the underlying index,” the company said in the supplement.
“The removal of Coca-Cola Hellenic from the underlying index and the resulting reduction or elimination of the fund’s holdings in Coca-Cola Hellenic may have an adverse impact on the liquidity of the fund’s underlying portfolio holdings and on fund performance,” it said.
GREK has just over $20 million in assets, a fifth less than a month ago, when the Wall Street Journal reported that Coca-Cola Hellenic might abandon its Athens listing.
Greece At A Crossroad
Index industry sources see the company’s exodus from Greece as further devastating the market capitalization of Greece’s stock market, thereby decreasing its relevance and buttressing the case for indexing companies to demote Greece to emerging markets status.
FTSE, again the indexing company behind the Greek-market benchmark GREK uses, in September reaffirmed that Greece remains on its “Watch List” to be demoted to its “Advanced Emerging” classification category.
MSCI, a FTSE competitor in the indexing space, meanwhile added debt-gorged Greece to its list of possible reclassifications, saying the southern European country risked being demoted to an emerging markets country from its current developed-market status.
But for now, officials at Global X aren’t prepared to say GREK’s biggest holding is about to fall out of the fund.
"We have been told the company will remain in the FTSE/ATHEX 20 Capped Index for now," a company representative told IndexUniverse.