Time to buy into Greece

So why on earth would you want to buy Greek shares if a Grexit might still be on the cards? Well, the thing is, a managed default which involved leaving the single currency, would be the best long-term solution for both Greeks as a whole and for shareholders.

While wages have fallen, they are still about 20% too high on some estimates, relative to a level that would make Greece genuinely competitive again. A devaluation would quickly close this gap and set off a tourism boom. Despite its fiscal problems, Greece still runs a primary surplus (or at least, it says it does) when debt payments are excluded, so it wouldn’t have to rely on the debt markets.

That might not be much of an argument - but the clincher is that Greek shares remain cheap on a cyclically-adjusted price/earnings (Cape) ratio of less than three. This makes them wildly cheaper than the US stock market, with a Cape of 23.6.

Now, obviously, it’s a bit of a gamble, so we’d suggest that you put it in the high risk part of your portfolio. If Greece did exit the eurozone (by no means certain, of course), any shareholders would face a sliding currency and possible short-term chaos and the imposition of capital controls.

But in the long run, history suggests that buying stock markets when they reach these sorts of levels tends to pay off. And they don’t reach these levels unless the outlook is scary. If you fancy having a bit of a punt, then the best way to invest in the Greek stock market is through Paris-listed Lyxor Athens ETF (Paris: GRE).

(Απόσπασμα από το: moneyweek.com)