According to ancient Greek lore, the phoenix was a long-lived bird that cyclically regenerates itself. This back-from-the-dead feat now appears to be taking root in the Greek economy as well.

You can link the economic pivot to a profound directional shift in the Greek economy. This Saturday will mark the four-year anniversary of an agreement to secure a bailout agreement with Eurozone finance ministers in exchange for very stringent government spending and taxation concessions.

Those moves produced a string of fiscal surpluses and a slew of ancillary benefits. “Household finances, fixed investment and employment have also improved, helping boost growth domestically while stimulating investor interest globally,” Chelsea Rodstrom, a research analyst at Global X funds, said via email.

The Greek economy is expected to grow 2.4 percent in 2019, according to the International Monetary Fund. “This puts Greece in the upper tier of the eurozone growth table,” noted Peter Dohlman, IMF mission chief for Greece, in a March 2019 IMF publication.

Investors have noted the rebound: The Global X MSCI Greece ETF (GREK) has rebounded 39 percent this year, making it one of the top-performing, unleveraged single-country funds of 2019. That may be cold comfort for investors who endured annual losses in excess of 30 percent in 2014, 2015 and 2018.

The GREK fund charges a 0.59 percent expense ratio and has $394 million in assets.

Yet for advisors looking to generate alpha for their clients who can stomach an outsized level of volatility, Greek markets hold the promise of further gains as the phoenix flies higher toward the sun.

While Greece has maintained an impressive level of fiscal discipline under its recent center-left government, many expect the nation to continue with promised reforms thanks to the recent election of Kyriakos Mitsotakis, a Harvard-educated former banker and leader of the center-right New Democracy party.

His key campaign promises include reducing red-tape and taxes for businesses, along with major investment projects to boost its tourism and export-driven sectors, Global X’s Rodstrom said. And she thinks that will help the Greek economy sustain its current momentum.

“Recent events, including last weekend’s elections and yields on Greek sovereign debt falling to record lows, and a recovery in consumer confidence could reflect the start of a virtuous cycle,” Rodstrom said.

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.