When the global economic crisis hit the world in 2007/2008, no one was expecting the aftermath Greece had to face. The Greek government debt crisis started in 2009 and hit rock bottom leading the country into a deep recession. The Greek economy was overwhelmed by structural weaknesses and the country’s public debt which triggered the final overall collapse of the entire economy.
Greece is still fighting the crisis and tries to recover from the downfall. Meanwhile, to stop the ship from sinking, Greece turned to selling assets and has created buying opportunities which international and US investors and buyers are using to their benefit.
The assets are being sold far below the price, and many rush to buy in the dips. Buying Greek stocks can take two turns, either the stocks will increase in value, or their value is unrecoverable and investors will have invested for nothing and lose their money.
The whole buying mania started when Greece held a referendum for a new proposal of creditors to save the country, and after it imposed capital controls to keep the money in the country. There are also a lot of speculations on Grexit which would mean that Greece would leave the Eurozone.
Grexit would affect the EU markets significantly as well, and the European Central Bank has already taken steps to protect the Euro, and other countries from a domino effect Greece could cause.
Nevertheless, big companies like Bryn Mawr Trust or Kistler-Tiffany are adding assets to their portfolios expecting positive outcomes. They believe that the USA has not much to do with the Greek crisis and that it will not harm business in the USA. Two years ago, the US export percentage to Greece stood only at 0.047%
Buy or Not to Buy?
Financial advisers and fund managers who are the main buyers in the markets have different opinions on the dips. Some of them are thrilled and consider it a great opportunity hoping that assets will rise in value, while others are discouraged by the idea of Grexit and think that it might be better to take a pass on the opportunity. The latter group thinks a long-term approach is needed and the current situation does not reveal or give any hints on how everything is going to work out.
Some believe as long as Greece is not leaving Eurozone, investments have a chance to generate large profits and are pretty much confident in the asset value. On the other hand, some investment companies stay restrained from European equities because of risk management as they say, and they plan to re-enter again at a later stage when they get a clearer picture of the whole situation.
The Greek situation shook up international markets, but as we said fund managers and financial managers seized the opportunity to buy cheap assets. The Greek crisis influenced the euro value, and many used the weakened currency to buy some renowned stocks.
Usually, buying dips is recommended when a market is oversold, which is this time the case, but the whole theory of leaving Eurozone makes financial analysts think twice.
Possible Outcomes of Grexit
Grexit, if being realized, would be a gradual process. It would be the first time in the history of the EU that someone is taking such a step (back). If Greece fails to pay back its debts and runs out of euros, it will have no choice but to repay its debt in the IOU currency (informal debt acknowledgment document. The abbreviation literally stands for “I owe you”).
The IOU would be used across Greece and of course, it would be too weak against the euro and cause inflation. Greece relies heavily on EU imports, and with the IOU, the prices would be too high for the already plagued Greek nation. In addition, Greece’s exports are very modest and cannot match the import sector.
The majority of the EU states advocate for Greece to stay in the Eurozone union, while some individuals, like the German Finance Minister, think that Grexit is a good idea. According to him, Greece needs debt relief which has not been legalized in the Eurozone. Others are strongly emphasizing the importance of Greece not leave. Greece accepted many bailout loans from the EU leading powers like Germany, France, Italy, even Spain, etc. In general, the EU is fighting hard not to lose Greece, but it also expects Greece to meet its obligations.
Greece is going through a rough time partly dragging the EU with it. This was the first type of such a crisis that hit the EU and a country which has been an EU member for more than ten years. Greek assets have become a bargain, creating a buying opportunity for many investment companies, fund management companies, and financial advisors. They use the highly volatile conditions and the drop in asset values as much as they can. All of this could backfire if the assets stay close-to-worthless in the market. Still, many US companies who seized the opportunity, refuse to believe that the Greek crisis could keep the asset values low.