Trusting anything out of Greece or any of the PIIGS nations is a bit difficult these days. With the weekend coming upon us, Greece is set to be the center of the world yet again as the future of statehood is at stake as far as the Euro is concerned. It is our take that Greece ultimately exits the Euro regardless of what the outcome of these elections are, but the world’s financial markets are more worried about the immediate future rather than the ‘ultimately’ time line.
What is amazing is how much of a recovery has been in the “U.S. plays” around Greece. The ADRs for the National Bank of Greece SA (NYSE: NBG) have been on fire in New York trading with more than 7 million shares having traded on Friday before 2:00 PM EST. This is almost 6-times normal volume now, but more important is that the $1.83 price after a 13% gain is more than 50% above the ADRs 52-week low.
Then there is the amazing move in Global X FTSE Greece 20 ETF (AMEX: GREK) with its New York gains being 7.7% to $11.73 on an almost unheard of 115,000 shares traded (8-times normal volume). Doesn’t this one sound like an ETF that was created just for short sellers? To show just how large of a move this really is… a 7.7% move in the Athens market on a relative basis would be like the DJIA rallying more than 900 points!
Elsewhere we are seeing gains in many of the others PIIGS.
The iShares MSCI Spain Index (AMEX: EWP) is up 0.4% at $23.95 and that is a bounce of more than 10% from the recent lows in early June and the end of May. In Portugal, we are seeing a 1.2% rise to $4.20 in the ADRs of Portugal Telecom, SGPS S.A. (NYSE: PT).
Even the ADRs of The Bank of Ireland (NYSE: IRE) are up 2.5% at $5.64 in New York trading.
iShares MSCI Italy Index (AMEX: EWI) is up 2.5% at $10.74 and that is roughly a 10% bounce from the lows at the end of May and start of June.
The gains are ue in large part to a win-win expected. If the anti-austerity socialists win then it is anticipated that there will be added liquidity by central banks to make sure that enough liquidity is in the system for day to day operations. If the pro-Euro group wins the election, then the markets can cheer because Greece will remain in the Euro until the next election cycle.
The Euro is also trying to hold its own as well as the CurrencyShares Euro Trust (AMEX: FXE) is up 0.15% at $125.66. Conversely, the basket of “dollar versus everyone else” via the PowerShares DB US Dollar Index Bullish (AMEX: UUP) is down by 0.3% at $22.53.
This weekend will bring an interesting news flow and the balance of next week (and much longer) hangs in the balance.
JON C. OGG