By Bob Negele
Greece recently voted to approve a budget which allows the European Union to continue with its multi-billion dollar bail-out of the economically struggling country. As a result, many investors, including hedge funds, are being tempted to invest in the country’s bonds at potentially bargain rates.
A recent article by Reuters highlights Dromeus Capital, a company which specializes in emerging markets, in its decision to bet on Greece.
According to the report, “Dromeus Capital… has launched a fund to bet on the country by buying government debt and bonds and shares of companies it believes will best weather a recession that has cut the [Greek] economy by a fifth.”
This could indicate that investors are viewing Greece as at the bottom of the plunge. Since the start of the financial crisis, stock prices in Greece have dropped more than 80 percent, which puts prices lower than they were in 1993. Companies are being valued around five times their earnings, as opposed to 16 times their earnings across the rest of Europe.
The Greek government voted and approved, albeit barely, an austerity package which was a requirement to avoid bankruptcy.
While Dromeus Capital is interested in buying up the low priced bonds, it is still engaging in a cautious investment plan.
Achilles Risvas, chief executive of Dromeus, said that, “You shouldn't get too carried away with it, but progress is being made towards deregulation of the economy, towards privatization and towards cost cutting within the public sector.”
While a cautious plan has been laid out, Dromeus is still reported to invest 200 million euros in Greek markets. This is apparently due to liquidity constraints. And while the firm has not disclosed how much money it has raised towards its 200 million euro goal, it has stated that it is close. The main investors in Dromeus’ bidding to invest more heavily in Greece are asset managers, private banks and family offices.
If Greece is to succeed in its attempts to bounce back and avoid bankruptcy, it is going to need the help of investing firms like Dromeus. And while 200 million euros may sound like a lot, when the country is battling many billions of dollars, it is going to need a lot more than Dromeus.
Regardless of who or where investments come from, the whole region should be pulling for Greece to emerge from its financial disaster stronger than before. Because of the interconnectedness of the world economies, what is happening in Greece will have much larger ramifications.
Hopefully Risvas is right, and his investments through Dromeus (and many others like his) will help catapult the struggling country. Until Greece regains its traction, the economy and livelihood of many will suffer.