Stocks in Athens Plunge, but Greece ETF Shrugs it Off
Today is the first day in five weeks that the Athens Stock Exchange has been open for business. After that long hiatus, Greece's major equity bourse plunged at the open today, tumbling from just under 791 at the open to 615.6 in a matter of a minutes. That is a 22 percent drop, or two percentage points above the definition of a bear market, in almost the blink of the eye.
The Global X FTSE Greece 20 ETF (NYSE: GREK) is receiving better treatment in the U.S. Proving that timing is everything, traders have bid up Greek stocks as the session has gone along, trimming the day's loss on the ASE to 16.2 percent at this writing. With the open of U.S. markets coming well after the open of European markets, GREK is trading higher by just over one percent at this writing.
GREK's Monday upside is made all the more impressive when considering the action in Greek financial services shares earlier today. National Bank of Greece (NYSE: NBG) fell 30 percent earlier in Monday's Greek session, or limit down for the day while the overall banking index (.FTATBNK) was also down its limit, according to Reuters.
At the end of the first quarter, GREK allocated nearly a quarter of its weight to financial services stocks, the ETF's largest sector weight by 730 basis points over consumer discretionary names. Entering Monday, GREK featured four banks among its top 10 holdings, including a roughly 8.4 percent allocation to National Bank of Greece, according to Global X data.
While stocks in Athens were closed, various media reports encouraged investors to look at the Market Vectors Egypt ETF (NYSE: EGPT) for possible signs of how GREK would perform once Greek exchanges reopened. Stocks in Cairo were closed for two months in 2011 during the Arab Spring, forcing EGPT to be the lone avenue of price discovery for Egyptian equities just as GREK has been for Greek stocks over the past five weeks.
Charts show EGPT rose after Cairo reopened that year, but the ETF proceeded to fall about four percent over the following month. Time will tell if GREK can hold today's gains, but one thing is clear: Investors were not afraid of what Monday would bring for the ETF because the fund did not lose any assets last week. In fact, investors did not pull any money (or add new money to) from GREK last month.
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