Lyxor Suspends Activity Of Greek ETF Amid Turmoil

Ticker GRE FP has plunged 16 percent as the Greeks shut their stock exchange amid economic and political turmoil

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

Global markets have plunged into the red as the Greek government has shut its banks and stock exchange, sending its citizens into a panic. As a result, Lyxor has temporarily halted creations and redemptions of its Greek equity ETF, casting doubt over whether its price reflects the underlying assets.

Bloomberg reported today that in Europe, the Lyxor UCITS ETF FTSE ATHEX Large Cap (GRE) plunged on the Deutsche Börse exchange by 16 percent and was halted on the French and Italian exchanges. The article said that trading on the Athens Stock Exchange has been suspended until 6 July in an attempt to prevent the collapse of its banking system. An official spokesperson told that the German exchange halted trading of the ETF as of 14.00 this afternoon (29 June).

Lyxor has updated its website today to read: “Due to exceptional circumstances affecting the Greek market, including the closure of the Greek stock exchange, we have decided, in the unit holders’ interest, to temporarily suspend subscriptions and redemptions of the units of the Lyxor UCITS ETF FTSE ATHEX LARGE CAP […].”

This swap-backed ETF aims to track the largest 25 stocks listed on the Greek exchange. It has €213 million worth of assets and was launched in 2007. Closing its market activity means the ETF can end up trading at a significant discount or premium to its net asset value.

Global capital markets have been sent into a spin too. The FTSE 100 and the DAX are down over 1.3 percent and 2.4 percent respectively today as the Greek Prime Minister Alexis Tsipras announced on Friday he would hold a referendum on 5 July as to whether the country will accept the creditor’s conditions, however the International Monetary Fund’s deadline for the next repayment is tomorrow (30 June).

Demand for safe havens has seen the German 10-year bond yield fall over 10 percent to 0.82 percent, while the gold price has shot up 0.5 percent to $1,179 per ounce.

Salman Ahmed, global strategist and portfolio manager at Lombard Odier Investment Managers, wrote today that the Eurozone is not in the same place as 2011/2012, and that the European Central Bank now has mechanisms to deal with preventing financial market contagion. Plus, the majority of foreign claims on the Greek economy lie with official institutions, which also limits the impact on investors.

However, Ahmed predicted a sell-off in riskier assets such as high yield and a flight to safe havens – we have already seen investors moving to German bunds and gold.

“In FX space, we expect pressure on the euro as it is deployed as a hedging instrument, like in 2011/12, coupled with the negative influence of any expected ECB action (either in the form of reshaped QE or OMT),” he added, referring to quantitative easing and the Outright Monetary Transaction, where the ECB purchases secondary issues of sovereign Eurozone bonds.

Jaisal Pastakia, investment manager, Heartwood Investment Management, commented today that the “encouraging” news is that this crisis point increases the chances of a clear outcome for markets.

“Rather than entering another period of procrastination, there is more potential for longer-lasting deal, whether that involves some form of debt re-structuring or, in a worst case scenario, potentially Greece exiting the single currency,” he said. “A radical solution now needs to be found, but for now the seeds of volatility remain sown.”

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.