Greeks Bearing Gifts

Greeks Bearing Gifts

over 4 years ago2 mins

A change of government is credited with helping the Greek stock market rise 33% in 2019 so far – but concerns about a political shift in Argentina sent its biggest stocks down 31% on Monday.

What’s going on here?

Things were looking black for Greece last year, with investors doubting the country’s leaders could steer its economy between the Scylla of massive debt and the Charybdis of tax reform 👹 🌀

But hopes for a new business-friendly government, now fulfilled, have pushed up the value of the Athex Compositestock index in 2019. Promises of economic growth-boosting initiatives to come have led to its performance outstripping European stocks’ overall, by Zeus!

The Athex Composite vs. Stoxx Europe 600 in 2019 (Source: MarketWatch)
The Athex Composite vs. Stoxx Europe 600 in 2019 (Source: MarketWatch)

7,000 miles away in Argentina, meanwhile, investors aren’t so pleased with the political scene. The president’s shock defeat in primary elections suggests a new government may take power in October: one potentially willing to default on the country’s debt. $16 billion is due to be repaid by Christmas... 😬

The Argentine peso has lost 20% of its value versus the dollar this week, and some of the country’s biggest stocks lost half of their value on Monday, wiping out the market’s 2019 gains.

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Why should I care?

Argentina’s president won power in 2015 promising a wave of pro-business reforms – but these haven’t been enough to save the country from spiraling inflation and economic recession ☹️

So those investing their hopes (and cash) in the ability of a new Greek government to revive the country’s fortunes would do well to keep a sense of perspective. While Greece’s recent successful return to bond markets suggests it’s unlikely to miss debt repayments again anytime soon, Greek stocks remain over 80% below their 2007 value – and getting the economy back on track is likely to prove a Herculean task.

The Stoxx Europe 600 is back where it was in 2007 – and 1999 (Source: Stoxx)
The Stoxx Europe 600 is back where it was in 2007 – and 1999 (Source: Stoxx)

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