Getting Better
The Great Recession laid waste to the Greek economy, which saw the official unemployment rate surge to 28 percent in 2013. Its still-high 17.6 percent jobless rate is just one of the major challenges that remain. “Resolving structural problems, including high youth unemployment and debt-to-GDP levels, will be critical for the continued recovery of Greece’s economy,” Rodstrom said
Still, key economic data points continue to strengthen. Rising personal incomes, for example, are driving consumer spending and corporate profits.
On a weighted-average basis, profits for the holdings in the GREK ETF are poised to rise 69 percent this year and another 26 percent in 2020, according to ETF Research Center.
OTE, Greece’s largest telecom company and the GREK fund’s top holding, is a clear beneficiary of the country’s healthier economic backdrop. The firm is expected to post more than €1 billion in operating profits this year, up from €502 million in 2018.
Even the Greek banking sector, which reflects the broader health of the economy and accounts for around 30 percent of the GREK ETF, looks perkier these days. Strong profits have enabled the major Greek banks to repay almost all of the emergency funds that were borrowed from the European Central Bank at the height of the nation’s crisis four years ago.
Even as Greek banking sector profits are on the mend, the sector remains quite inexpensive. Analysts at Alpha Finance note that despite a recent rebound in banking sector share prices, the average major Greek bank still trades at just 0.4 times tangible book value.
In fact, the average holding in the GREK ETF is valued at just 0.5 times book value, compared to a 1.6 multiple of book value for the typical holding in the Vanguard FTSE Europe ETF (VGK), according to ETF Research Center.
Despite this year’s impressive rally, Greek stocks remain among the cheapest in Europe, even as the nation’s economic growth is above the European average. That value and growth set-up portends further gains for one of the hottest ETFs of 2019.