Greece – a lucrative investment opportunity, not just a vacationer’s paradise
While many people associate Greece with a beach holiday, for us, Greece today is an investment opportunity. Following the outbreak of the Greek debt crisis and the significant economic downturn, financial institutions compiling indices (such as MSCI) downgraded Greece to an emerging market. As a result, in 2013, Greece became a matter of interest to us as investors in Eastern Europe. We didn’t initiate active coverage of Greece immediately because of the great economic problems. Both the country’s insolvency and leaving the euro area were on the agenda at the time. Greece had joined the eurozone in 2001 and had been a member of the European Union since 1981.
The Greek economy is six times larger than the Estonian economy, but Estonia’s GDP per capita today is more than 10% higher than in Greece. So, Estonians are richer than Greeks! At the same time, the total capitalization of the stock market in Greece is 13 times higher than in Estonia. 124 companies are listed on the Greek stock exchange.
Greek companies seemed interesting because of their international reach, this appealing feature made us visit them in Greece. Our first trip and meetings with corporates was in 2015, and since then we have become more and more familiar with companies, their business models and management. However, our first purchase on the Greek stock market was only made in 2017. We have been actively investing in Greece for the last 12 months. The share of Greek companies in the Avaron Emerging Europe Fund today is 18%, being the largest country exposure in our fund.
Why are we investing in Greece?
Reforms and limited economic ties with Ukraine and Russia. Greece has undergone a number of reforms since the crisis, which have significantly improved the competitiveness of the economy. We expect strong economic growth from Greece compared to other countries, supported by renewed private consumption, tourism and strong industry. It is important to note that, compared to other countries in our immediate neighbourhood, Greece has relatively low economic ties with Russia and Ukraine. Less than 3% of exports and 5% of imports are related to Russia, and trade with Ukraine is less than 1%.
Greece is being flooded in European funds. Similarly to Estonia, the European Union’s support programs making a positive contribution to the Greek economy. Greece, however, has much more favourable setup. For the period 2021-2027, € 31 billion of support measures from the European Recovery and Resilience Facility is allocated to Greece, representing 17% of Greece’s 2021 GDP. In addition, Greece will receive 39 billion from the European Structural Funds over the same period. This will provide strong tailwinds for the economy as a whole and Greek companies.
Various industries represented on the stock exchange, wide geographical exposure. There is a good variety of industries represented among the Greek listed companies and many of them are very well managed. Unlike in Estonia, where companies focus on the domestic market, the Baltics and Scandinavia, many companies in Greece are export-oriented and deliver regionally. For Estonian entrepreneurs regional footprint means Northern Europe and the Baltics while for Greek companies this stands for both Southern Europe and in the fast-growing markets of North Africa and the Middle East.
We invest in exciting companies
Coca-Cola HBC, a producer of soft drinks with a wide geographical coverage, also operates in Estonia. It is true though that the production of soft drinks in Estonia ended in 2009. However, Coca-Cola HBC sells the world’s most famous soft drink both in Estonia and in 28 other countries with a combined population of 715 million people. Why do we find it interesting? The company has a good financial position, a strong business model and an extremely professional and capable management team that is able to adapt to changing situations and thus ensure the sustainable development of the company.
Cement manufacturer Titan Cement International has been a listed company for 110 years. Greece’s first cement plant, once established near Athens, has now grown into a company with a broad global reach. TItan operates in the United States, Turkey, Egypt, the Balkans and Brazil. In Titan we are investing in a listed company that should directly benefit from the European support programs. Even more important for Titan is the recovery of private consumption in Greece, which has been kept to a minimum for more than a decade due to economic difficulties.
Retail company Jumbo is reaping the benefits of growing private consumption. Jumbo started as a toy store, but its current range of 40,000 products also includes home and seasonal products.
These are some of the listed companies we invest in in Greece.
How to invest in the Greek stock market?
It is possible to invest in the Greek stock market through listed shares, ETFs (exchange traded funds) or through the Avaron Emerging Europe Fund, which today owns 18% of its assets in Greece. We do not recommend investing in the Greek market through the ETF today as banks have a share of almost 30% in ETFs, but in our opinion, Greek banks are not interesting investments today due to the high risks. As the Greek stock market has long been out of the interest of investors due to the poor economic situation, today a retail investor will not be able to invest in the Greek market through larger banks. Hopefully this will change as investors’ interest in the Greek stock market grows. However, some interesting Greek companies are listed on stock markets other than Greece, allowing investors to reap the benefits of the Greek economic recovery.
See more about the Avaron Emerging Europe Fund.