Investor interest swings back to Greece
International investors have started evaluating the post-Covid environment of the Greek economy and the local credit sector following the encouraging news about the upcoming vaccine that appears to be accelerating the recovery of economies internationally.
That is the conclusion of the UBS European Virtual Conference that took place last week, which revealed funds’ high interest in Greece due to developments in banks and the imposition of the new lockdown.
The good news on the vaccine is expected to mainly benefit the sectors and economies hit hardest by the coronavirus, including Greece. That has led investors to reassess when the turning point of the local economy will come.
Before the onset of the pandemic Greece had been expected to post the strongest growth in the eurozone, making the local stock market among the top performing bourses in the world and leading the banks index to growth of more than 100%.
Although the new lockdown is certain to lead to a fresh contraction in the current fourth quarter and slow down the recovery in 2021, the new “effective vaccine” is seen as the catalyst projected to reverse conditions for next year. The UBS conference illustrated that investors have started factoring in the possibility of a stronger and speedier economic recovery, and fewer, if any, lockdown periods during 2021.
In this context they are focusing on the prospects and impact of all of the above on the credit sector, with a strong interest in developments about securitizations and nonperforming exposures, as well as the funding plans of domestic lenders.
It also became clear at the UBS event that the foreign funds are taking a fresh look at the Tier II securities of some banks after the significant improvement recorded since March, with the help of the particularly favorable climate for Greek bonds, whose yields have dropped to historic lows. Nevertheless, there was some investor concern over developments at Piraeus Bank regarding its convertible bonds (CoCos).
The light at the end of the tunnel for the Greek economy, with the prospect of the vaccine, is also highlighted by international financial firms: Capital Economics said that eurozone periphery countries such as Greece and sectors such as tourism will benefit the most from the end of the pandemic.
