Uncovering investment opportunities amid Greece’s debt crisis

Uncovering investment opportunities amid Greece’s debt crisis

As Greece’s debt crisis drags on, we asked analysts and traders for their views on the best investment opportunities at present.

The common theme that emerged is that with the uncertainty surrounding Greece, investors would do well to buy on dips.

Whatever the outcome, investors who are not averse to taking risks will still be wading into stocks, bonds, equities, currencies and precious metals such as gold.

In or out?

The questions on everyone’s mind are: What happens to Greece? Will it remain in the euro or leave?

Analysts remained divided.

“The risk of a Greek exit from the euro has increased dramatically following the misguided No vote at the weekend,” said Ole Hansen, the head of commodity strategy at Denmark’s Saxo Bank.

Vineeta Mahnot, an equity research analyst at Hem Securities in Jaipur, India, thought otherwise. “Although the Greeks have voted no in the referendum, it won’t be easy for them to stay away from the euro. If they opt for an exit, then the situation will worsen for them as inflation would spike up along with economic instability,” she said.

Christian Gattiker-Ericsson, the chief strategist and head of research at the private bank Julius Baer, voiced a similar opinion. “Yes, we assume there is a vital interest on the part of Greece to remain in the euro. However, we might see even further escalation after the no vote before a deal is struck.”

Others such as Pradeep Unni, the head of trading and research at Richcomm Global Services in Dubai, were unsure.

“It’s a tough call to make at this point of time. Going back to an independent currency will be a mammoth challenge to deal with, especially when the nation reels under massive unemployment and other financial issues,” he said.

Bank of America Merrill Lynch said a lot of mutual pride-swallowing was needed to avoid Greece’s exit from the euro zone.

“To public opinion in core Europe, already tempted by throwing Greece out of the monetary union, the ‘big no’ may be seen as the last straw,” said Gilles Moec, Bank of America Merrill Lynch’s head of developed European economics.

“Offering concessions now would be seen as weakness, handing Alexis Tsipras a victory that may resonate throughout the periphery. Finding a solution that keeps Greece in the monetary union would require the acceptance by the Europeans that more fiscal efforts have to be matched – not ‘preceded’ – by explicit debt relief.

“For a deal to work, Germany has to acknowledge that it cannot dither on debt relief, and Tsipras must give up his fiery rhetoric, and probably rejig his coalition to let ‘pro-programme’ parties in. That’s a lot to ask in a short time span.”

Following the referendum vote and the resignation of Yanis Varoufakis, Greece’s finance minister, the British bookmaker Ladbrokes lengthened the odds on Greece leaving the euro zone this year to 7/4 and shortened the odds of it staying in the currency bloc to 2/5.

Those odds imply a roughly 60 per cent chance that Greece will stay in the euro this year and a 40 per cent chance of Grexit.

Stocks

Most analysts expect European equity markets to remain volatile until a solution to Greece’s debt is found.

“European stocks are prisoners of the Greek situation until further notice,” said Mr Gattiker-Ericsson.

But despite this, he said equities offered the best opportunity right now, especially companies in the consumer, healthcare and technology sectors.

Mr Hansen agreed. “Investment sentiment has been dented by the ongoing crisis between Greece and its creditors. Until we see a solution, equity markets will remain volatile, not least considering the time of year when investment appetite is already reduced due to the summer holiday season,” he said.

However, the decline of European stocks has been limited since the Greeks voted “No” in Sunday’s referendum, rejecting the austerity measures demanded of them in return for bailout funds.

 

[“source – thenational.ae”]