CNBC: "Investors rushing to Greek stocks"

According to Nick Skreka’s article in CNBC, foreign investors are ready to rush into Greek stocks.

As reported, Greece was the first equity market that was downgraded from developed to emerging, but it appears that this created several paradoxes in the middle of the recession. In theory, that decision would generate a negative sentiment. However, the downgrade may help increase the equity prices and the levels of the general index in the Athens Stock Exchange.

The economic analyst notes “It seems there may have been some political reasons for Greece’s downgrade beyond the usual factors such as shortcomings of securities, borrowing and lending facilities, short-selling and transferability. These political risks for Athens-listed equities include civil turmoil, political instability, a lingering national bankruptcy, or a still persistent redenomination or “Grexit” risk. Even so, the jitters have eased since the downgrade and the equity market is sustaining current levels.”

He mentions that even before the downgrade, Greece was not an example of a high growth area or a typical emerging market. Consequently, investors weren’t focused on Greece. However, the situation has improved — the Greek government has forecasted a primary surplus, the country is ready to exit the recession and it is likely that its debt may be restricted even if the real economy needs more time to recover.

New data suggests that Greece will attract more investors, as emerging markets are a smaller and riskier area of investment. It better suits a category of investors, who specialize in troubled economies and political uncertainty.

Greek equities may not appear cheap, but they might prove to be one of most wise and safe choices.

The article concludes that the downgrade of Greece will attract foreign capital that may help a nascent local recovery to achieve growth beyond the stock market.