The web is filled with reports that Greece is recovering, but is it really improving a report from Bloomberg evaluates.
DG Value Surges On Recovery Plays
According to a copy of the firm's February investor update, Dov Gertzulin's DG Value Partners returned +4.48% net for the month of February, which ValueWalk has been able to review. Q4 2020 hedge fund letters, conferences and more Following this performance, the firm has returned +8.32% net for the year to the end of February. Read More
Positive News For Greece
In good news, euro area’s finance ministers have agreed to provide the bailout funds amounting to 7.5 billion euros ($9.6 billion) to Greece of which 4.2 billion euros were issued over the weekend and the balance will be released in June, provided the country fulfills some conditions.
Following the bailout news, Fitch up-ed their rating on Greece to B- from CCC, which is still six notches below the investment grade. The ratings triggered one of the biggest sovereign-bond market rallies since the start of the crisis.
Also, Prime Minister Antonis Samaras announced plans to re-enter the bond markets in the first half of next year.
According to recent news, some of the hedge funds are interested in the recapitalization of Alpha Bank SA in June. Also, two local companies have been able to issue corporate bonds carrying yield of 8 percent in recent weeks.
The price of the Greek gross-domestic-product warrants have improved significantly. The price rose from about 0.2 euro cent a year ago to 1 euro-cent mark last week, reflecting a certain growth prospects.
Not good for economy
According to Elstat, Greece’s statistics agency, in the first quarter the economy contracted by 5.3 percent against the same period a year ago, marking the 19th straight quarterly decline.
Another stat from Elstat reveals that the Greek economy is smaller than it was in 2005. The economy has contracted about 28 percent since mid-2008. Also, European commission expects a further squeeze of 4.2 percent in 2013.
Though hedge funds are lining up to make investments in Greek sovereign debt, the private sector is not experiencing such a rush and deals which have been made are too small to make any significant impact.
Also, small companies or households are witnessing dearth of funds. Borrowing costs for such enterprise still is quite high, even when compared to other countries.
The operating environment currently in Greece is highly unattractive marked by red tape, unstable regulatory environment, an opaque legal system, and a slow and often corrupt judiciary.
The social factors are also strained owing a great deal to a record 27 percent unemployment in February. Also, the coalition government lends a bit of instability and uncertainty.
Good, bad.. not sure
At the start of the month, the government accepted a privatization offer for Opap SA. The gambling company is the country’s most profitable state-owned enterprise. Despite this, government received only two bids for selling a 33 percent stake in the firm. Also, the final settled price of 652 million euros was at the low end of expectations. No doubt, the sale will fetch the much needed funds, but the low bid amount is something which is questionable.
There is absolutely no doubt that Greece is witnessing signs of recovery, which were absent some six months back. However, the repairing is required across every filed, financial, social and political, which is still a long way ahead.