ECONOMY

Record cash hits Greek stocks as traders take flier on accord

Even as Greek stocks head for a fourth quarter of losses and volatility surges, investors are having a hard time turning down bets that things will improve.

An exchange-traded fund tracking Greek shares has drawn cash every week this year, totaling about $167 million, data compiled by Bloomberg show. Short interest slipped to the lowest level since July this month as Greece becomes the only western- European market posting a drop since January.

Greek stock swings almost doubled from last year as Prime Minister Alexis Tsipras sought a compromise with creditors to unlock bailout funds. Investors brave enough to place wagers now could see huge returns because equities stand to rally if the country implements new reforms, according to Andreas Kontogouris at Beta Securities SA.

“These investors want to be ahead of the market,” Kontogouris said by phone from Athens. “There’s a chance that, come June, Greece will not only have a new financing deal, but it will also start adopting major reforms. Suddenly things will look a lot better.”

The ASE Index has fallen 3.8 percent this quarter, with banks reaching a record low on March 19. The benchmark gauge moved an average of 3 percent a day in 2015, compared with 1.6 percent last year. The Stoxx Europe 600 Index had average daily swings of 0.7 percent this year.

Tsipras’s ascent has sown concern that the new government will fail to honor agreements tied to funds keeping the country from going insolvent. Credit-default swaps indicate the chances of a default have risen to almost 75 percent from 67 percent at the start of the month, according to CMA.

Detailed plan

To win a Feb. 20 agreement extending the nation’s bailout, Tsipras backed away from election pledges to ease budget cuts and restructure debt. Greece has agreed to to produce a detailed economic plan that would bolster finances — something the International Monetary Fund, European central banks and other creditors have yet to see.

European officials said on Monday the nation’s proposals need more work.

In its latest blueprint, Greece would allow a budget surplus of 1.5 percent of its 2015 economic output, Finance Minister Yanis Varoufakis has said. The proposal would bring in additional revenue and enable the economy to grow 1.4 percent this year, according to a Greek government official.

With the ASE near its lowest level since 2012, traders are speculating a rebound could be strong. The index has climbed more than 5 percent on six days this year. The biggest gain for the Stoxx Europe 600 Index was 2.7 percent in the period.

Short interest

Short bets on the Global X FTSE Greece 20 ETF fell to 1.6 percent of shares outstanding, down from a high of 20 percent in December, Markit data show. The short interest is lower than for similar funds tracking stocks in Germany, France and Italy.

To Vassilis Patikis, head of global markets at Piraeus Bank SA, it’s still too soon to invest in Greece given the market volatility.

“There’s still too much uncertainty to call it either way,” Patikis said from Athens. “The market is driven almost entirely by politics, making it impossible to have a view based on the usual fundamentals.”

While Greek shares fell this year, the rest of the region took off as the ECB started a quantitative-easing program. Stocks in Germany, Italy and Portugal are up more than 20 percent for 2015. The Stoxx 600 has advanced 17 percent, its biggest quarterly gain since 2009.

“Some investors are clearly looking to make a quick buck with Greece,” said Ion-Marc Valahu, co-founder of Clairinvest in Geneva. “They’re playing the knee-jerk reaction if we finally get a political resolution. For me, a rebound will last a few weeks at the most. With QE lifting the rest of Europe, there are easier places to make money.”

[Bloomberg]