A Surprising Opportunity in Europe
A Surprising Opportunity in Europe
Greece is an emerging market that investors should consider, says Jefferies’ Christopher Wood.
It now has what is probably the most pro-business government in Europe since the election victory of Konstantinos Mitsotakis in July last year. He immediately removed controls on capital transfers and within months scrapped capital gains tax. He now plans other reforms including replacing the pay-as-you-go pension scheme with a US-style 401-style individual retirement financing system.
A former McKinsey management consultant, Mitsotakis is so popular as prime minister that his New Democracy party is 21 percentage points ahead of the Left-wing opposition alliance.
Although Greece has been hit hard by the pandemic, there are grounds for optimism once its economy bounces back. It is in line for massive assistance from the European Union’s Recovery Fund — €32 billion, equivalent to 17 per cent of last year’s GDP. There is now evidence of a resumption of foreign direct investment. Microsoft has announced a billion-euro plan to build data centres; Volkswagen a “climate-neutral mobility” project on the island of Astypalata.
International capital markets have grown confident enough about the future to allow its government to raise €2 billion last October from a 15-year bond issue paying just 1.15 per cent. (At its worst in 2012 its ten-year bonds traded at a 37 per cent yield). Greece now also boasts the most university graduates per capita of any country in the Eurozone.
“If the current government can stay in power to its full mandate it has the potential to trigger a real transformation” of the economy, Wood says.
There are 184 companies listed on the Athens Stock Exchange, whose index has been trending sideways since it bounced back from the March Covid-19 shock in June.
A Surprising Opportunity in Europe taken from our ‘On Target Newsletter’ issue no 261