Athens Crushed As Markets Open, ETF Falls 13%

The Lyxor Greek equity ETF (GRE) plummets over 13% as Athens re-opens exchange

Editor, Europe
Reviewed by: Rachael Revesz
Edited by: Rachael Revesz

Greek equities plunged around 20 percent today as Athens Stock Exchange (ASE) re-opened after a five-week hiatus and industry experts are predicting more economic and market trouble ahead, while the U.S.-listed Greek equity ETF has proved to be a useful tool for price discovery, having performed in line with the underlying market. However, the Europe-listed ETF fell over 13 percent today as it was mostly closed during those five weeks, although it fell slightly less than the Greek market overall.

Bloomberg reported today that investors who followed the Global X FTSE Greece 20 ETF were “prepared” as the ASE Index dropped 17 percent after a five-week closure, yet the U.S.-listed security fell the same amount from 26 June to last Friday. Industry commentators celebrated the mirror-like performance of the ETF, even in the absence of market makers quoting real prices. The ETF in the U.S. is up 0.6 percent today.

In Europe, the Greek equity ETF from Lyxor (GRE) was halted on most exchanges except Stuttgart, but has now re-opened on Xetra and Euronext, and will resume trading on the Borsa Italiana tomorrow (4 August). As a number of underlying stocks are still not trading, the issuer will not allow in cash redemptions, only “in-kind” redemptions through their capital markets desk. The ETF fell 13.85 percent today at the time of writing, slightly less than the ASE index at minus 16.2 percent.

Jasper Lawler, market analyst at CMC Markets UK, commenting on the dramatic fall in Greece today, said: “It makes sense to see these kinds of declines given the Greece’s flirtation with an exit from the Eurozone since the stock exchange was closed five weeks ago. That said, dropping by over 20 percent in a single day is almost unprecedented for the benchmark stock index of a developed country- and really is an utter pasting. It puts recent moves in China to shame.”

The declines have hit the economy, too. July’s manufacturing Purchasing Managers’ Index fell from 44.8 in June to a very weak 18.8 in July.

Jonathan Loynes, Capital Economics’ chief European economist, said that the scale of the damage done to the Greek economy by the country’s renewed crisis and capital controls “looks set to be far worse than the provisional plans for a third bailout envisaged” and suggests that Greece is still likely to leave the currency union at some point.

Capital Economics predicts average annual growth in Greece of minus 4 percent, worse than its previous forecast of minus 3 percent, and said next year’s average growth figure could be even weaker at minus 5 percent.

Rachael Revesz joined in August 2013 as staff writer. Previously an investment reporter at Citywire, she has a background in writing content for retail financial advisors and has covered a wide range of subjects in finance. Revesz studied journalism at PMA Media, which has since merged with the Press Association. She also holds a B.A. in modern languages from Durham University, as well as CF1 and CF2 financial planning certificates from the CII.