Another new era dawns for Greece after voters rejected the incumbent hard left Syrzia government at the July 7 general election and voted in the centre-right New Democracy. The economy also, finally, appears to be turning a corner. The Greek treasury tapped a 10-year bond for €2.5bln earlier in the year; the first time it has raised capital since exiting its bailout programme. The 10-year bond now trades at a yield of just 2.146%, while the spread over comparable bunds has collapsed. Equities have rallied sharply since the beginning of the year, recovering all of the 2018 losses and returning to 2015 levels. Moreover, Greek equities appear in the cheap, green quadrant on our equity valuation chart on the previous page.

Given that the economy was not inflated by the post-GFC global monetary easing as was the case for most developed and emerging markets, economic activity has recently fared slightly better amid intensifying global headwinds. In particular, the manufacturing PMI remains in expansionary territory, defying the regional contraction, while Greece’s world export market share has been increasing (a proxy for improving international competitiveness).

(Click on image to enlarge)Source: Bloomberg, Macrobond, Variant Perception