If what goes up must come down, then what goes down must go up. Surprisingly, the latter trend has taken former bad news magnet Greece from the bottom of the pack to among the best performing global equity markets this year. How did that happen?

A big reason is that Greece’s new prime minister, Kyriakos Mitsotakis, has buoyed investors’ hope of better times ahead. Mitsotakis took office last month and has promised tax cuts, along with eliminating bureaucratic delays on projects designed to boost Greece’s economic growth. Thus far, Greek stocks are reacting well. 

The Global X MSCI Greece ETF (GREK) has jumped almost 27% since the start of the year, and Greek stocks are outperforming their peers in both Europe and in emerging markets. For example, the Vanguard FTSE Europe ETF (VGK), which tracks a developed Europe index, is up just 10.3% year to date while the iShares MSCI Emerging Markets ETF (EEM) has gained only 2.9%.

GREK tracks a basket of 33 publicly traded Greek companies. Top holdings include Hellenic Telecommunications, Alpha Bank and Eurobank Ergasias. The fund has $348 million in assets and charges annual expenses of 0.59%.

Although Greece is a member of the European Union, major index providers FTSE Russell and MSCI still classify Greece as an emerging market. As such, exposure to Greek equities is included in some broader emerging-market ETFs such as the Vanguard FTSE Emerging Markets ETF (VWO).

Greece was among the hardest hit nations after the 2008 financial crisis. Heavy indebtedness and spiraling spending deficits triggered the country to seek emergency help from the EU and International Monetary Fund. Despite three successive bailouts totaling $330 billion, Greece was locked out of the international bond market in 2010.  

Fast forward to now and Greek finances are on the upswing.

In March, Greece’s sovereign credit rating was raised two levels to B1 from B3 with a stable outlook by Moody’s Investors Service. Last year, Fitch Ratings upgraded the country’s credit rating to BB-, while S&P Global Ratings graded Greece a B+. While that’s a step in the right direction, each of these respective credit ratings are non-investment-grade status. 

Despite Greece’s inclusion in emerging-market equity indexes, it’s absent in bond ETFs like the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) and the Vanguard Emerging Markets Government Bond ETF (VWOB). But Greece is slowly getting back into the game regarding the international bond market, and in March it had its first 10-year bond issue since the depth of its debt crisis nine years ago. As Greece proves its creditworthiness to borrowers, its inclusion in fixed-income indexes will likely increase.

Is The Worst Over?

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