GREK Holds Up Even As Greek Market Plunges

Greek stocks took a 23 percent plunge Monday morning when the Athens Stock Exchange reopened for trading after a five-week shutdown. The only U.S.-listed Greek equity ETF, the Global X FTSE Greece 20 (GREK | C-61), opened lower, but it didn’t stay in negative territory for long.

GREK dropped some 1.5 percent before it turned marginally higher, avoiding a retest of record lows seen recently. It wasn't until late in the day when the fund turned lower again. The relative resilience of the ETF in the face of significant weakness in Athens is tied to the fact price discovery in GREK was taking place throughout the shut-down. The fund, in fact, lost some 16.5 percent in the past five weeks. Its biggest holding, Coca-Cola HBC, is foreign-listed.

“There is a lot of discussion about the ability for ETFs to function where the underlying market is illiquid,” Peter Tchir, head of macro credit strategy in New York at Brean Capital LLC, told Bloomberg. “GREK, in my opinion, seems to have done an excellent job of tracking the market.”

GREK has already lost some 53 percent of value in the past 12 months, as the chart below shows. In a way, Athens is catching up to what has already happened here.

Chart courtesy of StockCharts.com

Leading the decline in Athens were bank stocks, with a decline exceeding 30 percent Monday amid concern about the needed recapitalization of banks and tighter capital controls ahead, according to news reports. About 25 percent of GREK’s portfolio is tied to financials.

The Greek stock market first shut down when capital controls were imposed on Greek banks at the end of June, as Greece faced default and a potential exit from the eurozone, CNBC reported. Since then, the country has already agreed to new austerity measures, although details are still in the works.

Investor sentiment in Greece was further dampened today by the latest round of economic data, which showed the country’s manufacturing hit a record low in July.

Still, through it all, U.S. investors have found value in Greek equities, and have continued to buy into GREK as the fund dips.

In the past year, net creations hit $184 million even as the fund dropped by half. Year-to-date, that figure nears $300 million. And even during the past five weeks when Greek equities weren’t trading, investors poured another $3 million into GREK.